Gold: "reculer pour mieux sauter"

A very interesting, concise post from Mish. He says deflation forces borrowed money out of speculation, so gold and silver will drop while this happens; but then - it could take some time yet - will come the rise: "The reason gold will reassert itself is that Gold Is Money."

Mish's line appears to be consistent (June 2007):"Typically gold is a counter-cyclical asset that does best in real terms when liquidity evaporates."

Gold seems unpredictable - the demand for it as jewellery is unrelated to price - but if his chart below is correct, there is an underlying trend of steadily increasing demand. New gold mined each year is only some 2% of the total still available above ground - gold generally doesn't get used up (though I have drunk Danziger Goldwasser) - so the supply cannot be easily boosted by the State in inflationary times.

Gold, or paper? Your choice.