The inflation/deflation debate is hot… It crackles and pops like a pine fire. But it gives off little helpful light. Abe Lincoln may have read by the light of an open fire. But when we tried it, we singed our eyebrows. It made us suspicious of Old Abe; maybe he wasn’t quite as truthful as he pretended to be. Later, we realized he was a mountebank. But that’s another story…

Today, we light a candle and try to interpret the shadows on the wall…

Yesterday, the Dow fell 81 points. Gold dropped $5 to $1009.

Will the feds succeed in causing inflation? Or will they fail? Will the dollar continue to go down? Or will it prove to be a safe haven currency in a time of deflationary trouble?

According to the papers, the feds have already done it. “Fed says recovery underway,” says a headline from yesterday’s press.

Another headline tells us that

Non-dollar currencies give back very little…The Unemployed are remaining unemployed… FOMC puts away the board games today… China invokes a “Public Morals” defense…

Gold sold off gently in thin Far East trading on Monday morning…and the bottom was in a couple of hours before Hong Kong closed. From there, gold rose until about 10:00 a.m. in London, and although it tacked on about another ten bucks during Comex trading in New York, it had given all that back by the Comex close.

As for the silver price, it bottomed at the same time as gold and was off to the races shortly after London opened. The top was was in shortly after 10:30 Eastern time when it appeared that the about-to-become-parabolic rally drew the attention of the boyz. From that point on, the silver price didn’t do too much.

As would be expected, volume in gold on the Comex Friday was pretty heavy; but somewhat lighter yesterday. In silver, volume was heavier yesterday than it was on Friday…which stands to reason when you consider the