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Prediction When the Economy Does Recover

FED is overly aggressive in trying to prop up the economy 10/08/2010.
Currently the unemployment rate is 9.7%, growing gov't deficit.

Highly inflationary risk once economic environment picks up, need to look at
money velocity. Lesson: There could be a lot of money afloat but this does not matter unless people are taking the money to chase down goods(spend the money).

FED is thinking about QE 2.0. Inflation will be good for commodities, such as oil and even gold.

Why buy gold right now and why is it going to new highs?
Assume gold will continue to be the safe-haven and inflation-hedge asset:

Scenario 1: Economy continues to lag and stay weak.
Flight to quality for gold will continue.

Scenario 2: Economy picks up. Inflationary environment over 3% is probabilistic.
Justification of gold prices, take historical gold prices and calculate the inflation over the years since that price, take inflation during this economic period to find Future Value.

BOTH CASES: Long Gold
Risks: People percieve Gold prices is speculative and the bubble will pop. Economic recovery might prompt people to pull money out of commodities investing into other forms of investments such as equity.