DEFLATION WORRIES OVERWHELM MARKETS

Gold is up $1 in early trading and silver is up $.02. However, that is substantially below the overnight high, which was more than $10 higher on gold. Silver traded as much as $.17 higher. The reaction upward in gold was due largely to the fact that the European Central Banks cut interest rates by .50%. Their rate is now 2%. There were a lot of fears that they may cut rates a full 1% and that is what had strengthened the dollar so much over the last two weeks. It is also the fact that put some pressure on gold during that period of time. Nevertheless, the dollar is up 11 basis points at 84.54. Oil has been extremely volatile trading as low as $35.99 and as high as $37.99. Oil is currently down $1.06 at $36.21. The equity market is also lower with the Dow down 100 points. These markets are all very skittish as Bank of America is now expected to go back to the government for more TARP funds. The banking sector in general is in very difficult circumstances.

On CNBC the analysts were actually talking about whether it might have been better to have allowed the problems banks to fail and put the governments money into the good banks to allow them to pick up the pieces. In all likelihood that would have probably have been a better solution. It would have provided for an orderly liquidation of massive problems that exist in the financial sector. Perhaps the actions taken to date will simply prolong the difficulties, much as the actions taken during the Depression prolonged it.

There is no doubt that deflation worries are overwhelming the markets. With retail sales down sharply, falling 2.7% in December, and unemployment rising aggressively, the country and the world are in very difficult economic conditions. One has to wonder why the authorities allowed the financial sector to create so much jeopardy for the economy in general. That of course is a political question and we have only to look at who contributes the most money to the politicians.

Renewed banking sector concerns however, should be good for gold as there will probably be some increase in safe haven demand. Michael Gross told Dow Jones Wire Service, "You could see some new safe haven buying coming into gold over the next few weeks if these banks struggles continue." Gross thinks gold has good support around $800 and does not think that level will be breached. Several analysts sited by Dow Jones Wire Service said they see solid support at $800 for gold partly because prices below those levels would eat into the marginal cost of production for producers.

Many analysts view gold as a buying opportunity at these levels. When one looks at the risk to reward situation, a return simply to the $900 level, which is highly probable, would produce an increase of more than 10%. A move up to $1,000 would produce a gain of more than 20%. The risk on the down side is 8% or less. Therefore the risk to reward picture for gold is very constructive.

When we look at the available supply of gold it is important to note that global mine production dropped 4% last year. In South Africa, one of the principal producers output dropped 14%, to its lowest level in a century. In addition, producers continued to reduce their hedge book, which is now below 500 metric tons. That suggests the mining companies themselves believe in higher gold prices ahead. Moreover, it is anticipated by Gold Fields Mineral Services that official sector sales will be limited in the first half of this year. They are forecasting a 23% year-on-year decline in net official sector supply in the first half of 2009. That again should be bullish for the gold market. As those statistics began to come out, the gold market rallied and before this report was concluded gold was up $5. GFMS also said investment demand for gold should surge this year because of low interest rates and ongoing geopolitical crisis. They said, "A large portion of capital currently sidelined could be invested in gold and fuel a price rise above $1,000 a troy ounce during the year." Gold Fields is one of the most respected analysts in this sector. They are normally very conservative in their forecasts. If $1,000 forecast is conservative, one has to wonder how high gold could really go. Perhaps, Fred Hickey and Citibank who are forecasting gold to reach $2,000 will be proven correct. GFMS also said, "Risk aversion and inflation concerns could drive gold to a record high in the first half of 2009." Phil Klapwijk, the Chairman of GFMS said, "The impact of strong demand for physical bullion on prices in 2008 was blunted by selling from funds raising cash to meet margin calls. If it hadn't been for this fund selling, we'd be easily back over $1,000 by now and, as soon as it quiets down, I'm sure a strong rally is going to emerge."

In this environment with conservative analysts talking about gold back over $1,000 an ounce it makes sense to acquire gold at these bargain basement levels. Call Goldline at 1-877-341-2646 for assistance in getting started with acquiring gold. Some may even wish to increase their holdings based on the forecast for the economy and the fact that the banking sector is falling deeper into trouble as we speak. Ask about Goldline's Price Guarantee Program, which provides a two-week window of opportunity to re-price your order and get more gold for your money in the event of a further correction. Be sure to ask for the free information package, which includes an article from Forbes.com talking about formal devaluation of the dollar, an article quoting a former policy maker at the Bank of England who is warning Americans to be prepared for a massive dollar collapse and other articles that discuss the upside potential for gold and silver. Also ask for the special interview on CD with noted analyst Peter Grandich. To receive the free information package and CD, call Goldline at 1-877-341-2646.

If you would like to take advantage of the Price Guarantee Program, which provides you with a two-week window of opportunity in which to re-price your order in the event of a correction, you must select assets with some collectible value such as Swiss 20 Francs, Double Eagles and Silver Dollars. Call Goldline at 1-877-341-2646 for further information on the Price Guarantee Program and how you may be able to receive free coins.

To receive the free information package including articles on the dollar, the economy and gold, call Goldline at 1-877-341-2646. Goldline also provides several other helpful articles. There are a number of other independent third-party source articles that you will find extremely helpful and informative. You will also receive the Client Account Agreement, a company brochure and a Coin Facts Risk Disclosure booklet. Read these carefully before you make a purchase. Call Goldline at 1-877-341-2646 now to receive your free information package.