Will gold correct soon?

Some contrarian investors and academic economists have made the call ('put' in trading terms) that gold is now inflated and in a bubble - thus should reverse it's trend. Their theorized aspect here is that gold was a rush buy when the US dollar declined rapidly in March 2009. The analysis is somewhat correct but not entirely sufficient as gold generally have been on a steady incline; so panic buying cannot be solely placed in the equation. Essentially if gold was to correct significantly it should have already, this can be seen on the 7th July 2008 when the US dollar was at an all time low of 0.71 cents and gold was at 967 an ounce. The correction occurred when the USD gained strength on the 14 July 2008 from there gold dropped to 699 and the USD rose to 88 cents on the 10 March 2009. Gold overall closed at 723 in 2008 (October) and from December 2008 gold rose to the current market price (1,124 December 2009) and the USD weakened to 76 cents (December 2009).

This has been just over a year of gains for gold.

Within that 1yr period the corrections against gold have been mild, the reason being is that the USD is an unstable and weak currency, the US ecomomy is weak and usable and US deficits will eventually bleed into a debt crisis at some point. Gold tested highs this year (2009) on the back of risk aversion that never really abated. From Dubai, Greece and the rest of Europe there is a festering problem of sovereign funds defaulting. So from the last 8mths risk has been on and off which in turn has caused volatility within tight indices trading ranges, nevertheless gold has been a safe haven.

As discussed in Gold price breakout on a 'mini' crisis 2009 (update4) - 'mini' crisis is now here gold is comfortable in its trading range, a significant pullback would be to the 990 price, with the market unsure that a economic recovery has actually started and a strange form of stagflation is falling onto the US economy. Gold is still a buy.