Only consider: Turkish incursions into Iraq, increasing IED deaths of US soldiers in Afghanistan, turmoil in Pakistan over Musharaf’s rule, our unstated threat against Iran, oil at nearly $100 per barrel, Fed liquidity pumping overtime, mortgage time-bombs ticking while house prices tumble, threats of stagflation in the air - what about the current world scenario is there for gold not to like?

Gold did finally correct $50, after its virtually unstoppable run from the $680 area in early September to over $800 last week. In nine weeks, gold prices ran up $140 before peaking on Friday 11/09/7 at nearly $840, essentially tying the old record set in January of 1980. And that’s in 1980 dollars, not adjusted for the considerable inflation we’ve seen since then.

The dollar is now being dissed worldwide – not only by the markets, but by rappers, supermodels, and most recently, Hugo Chavez (“The empire of the dollar has to end…Don’t you see how the dollar has been in freefall without a parachute?”) and Iran’s Mahmoud Ahmadinejad, who was quoted at the latest OPEC summit as calling the US dollar “a worthless piece of paper.”

This cacophonous wail mourning the death of the dollar reached a peak the other day as everyone joined the chorus. But as always, once everyone recognized that the dollar had nowhere to go but down, and gold nowhere to go but up, then, at least temporarily, it ceased to be true - and gold lost about $50 US in short order.

Meanwhile, back at the Fed, chairman Bernanke continued to aver that US policy concerning the dollar is unchanged. And he’s right. The policy has been that every Fed mouthpiece will continue to say that a strong dollar is a desirable thing, while doing basically nothing whatsoever in its support.

This hints of a strange, almost Alice-in-Wonderland sort of monetary policy. As Julian Philip of Gold Forecaster emphasized in an 11/19/07 article, “The world's main reserve currency just should not show a 15% decline in 10 months, if it is to continue to hold its position.”

Yet, looking over past seven years, we find comparable results. Consider that as recently as April of 2001, $258 would buy an ounce of gold. And even after last week’s correction in gold prices, it now takes more than three times the number of dollars ($786/ounce) to buy that same ounce of gold. The lesson here, not surprisingly, is that seven years of consistent Fed policy have yielded consistent results.

Short term results may vary, of course. And with the likes of Jay-Z, Gisele Bundchen, Hugo Chavez, and Mahmoud Amadinejad piling on, there is a strong possibility here of an intermediate dollar rally.