Deflationary fears lessened.

I do not think that the European Summit solved the problems of Europe, but it did one thing: it showed the world that European leaders will not let the banks of Spain fail. This has reduced the fear of deflation considerably. On that news, gold rose to 1,604(up 3.47%) and silver finished the week at 27.58(up 5.08%).  The Dollar index sank by 1.13. Even gold and silver miners rose.

Almost unreported in the Media has been the expert meeting in Korea,where reps of European governments agreed on a 40T plan to renovate, replace infrastrucre and spend money on new things like ports, airports and power plants. All these events beg one question: where is the money coming from? European nations do not generate enough revenue (in fact they are running deficits) so an ambitious plan can only be financed by the ECB printing money. The Germans will be unhappy with the money printing, but they have to agree, just as they agreed to the bank bailouts without burdening the countries of Europe with more debt.

These events open the possibility to a number of things. Will Friday's rally in precious metals continue next week? And the drop in the value of the Dollar continue? Will interest rates on Treasuries rise now that the fear of deflation is lessened in Europe? And will the FED have to print if Treasury options turn sour along with the economy?

I continue to marvel at how Larry Edelson's forecasts keep missing. But, the biggest question is whether the correction in gold prices is over and gold will now resume its march upwards.