In forecasting gold's price trends, Rick's Picks has generally been careful not to let our long-term bullish bias color our observations from one week to the next. We think readers deserve straight talk, even when it has less than bullish implications for the precious-metals sector. Such as now. We are not so much negative on bullion as we are more cautious than usual. Specifically, we don't expect gold to leave the $1,000 barrier behind any time soon - within the next three or four months; rather, we foresee a choppy correction over that time that could bring quotes down to $800 or even lower.

Why the dour outlook for the intermediate term? The reason is painfully obvious: With fiscal and monetary policy more inflationary than ever in the U.S. and around the world, gold should already be trading well above $1,000; but it is not. We won't dwell on why, as there are many plausible reasons. Suffice it to say, deflation has decimated the investment resources that institutional players might now be deploying speculatively and/or defensively in gold.

The resulting bust has brought on a true global crisis that has devastated financial markets and erased perhaps $80 trillion of asset values from investment portfolios. Consequently, institutional investors have grown so fearful of a systemic crash that they have shifted allocations toward the only sure thing their feeble imaginations will allow: Treasury paper. Not stocks or real estate - not even gold, which has been buoyant but hardly frenzied. Gold may be a riskless investment according to some gurus in hard-money circles; but in the world of pension funds, insurance companies, banks and other agents of investment orthodoxy, gold is still the province of lunatics, schemers and enemies of the American Way.

Goldbugs should therefore be neither surprised nor disappointed by bullion's failure to catch fire. They should instead take heart from the fact that gold has performed quite well relative to all other classes of investable assets and is likely to continue to do so regardless of how things play out. Concerning the big picture, we can only imagine two possible scenarios. The more likely, in our view, is that deflation will deepen until all debts have been liquidated through bankruptcy. But, if the slow, deflationary death this approach produces proves too painful economically and politically, then hyperinflation will at some point be employed, even if it destroys creditors and savers for a generation in the process.