Stocks put in a solid performance as better than expected earnings from a few companies as well as a few mergers seemed to encourage some buying before the holidays. The market continues to work its way higher, and I expect that it will be up about 10% between now and the end of Q1. Even though economic growth won’t be that strong, all of the stimulus that is being pumped into the system will have an impact.

Gold remained in a tight trading range for most of the day, it was unchanged at $1,385. I keep mentioning how important it is for the precious metal to get back above $1,400, we are very close but it’s still under a little bit of selling pressure.

The ^HUI was down 1 point to 561, the index is trying to find a bottom and it’s too early to tell if it has. A close above 580 would be a good signal that new highs are ahead.

The stock market is behaving just like I thought it would. For the last 1-2 months I have been saying that I felt the major indices would be at new yearly highs by the end of 2010. It’s not because the economy is finally repairing itself. Let’s face it, whatever recovery we have will be an artificial one that is achieved through massive amounts of newly printed fiat currency. That’s not a healthy recovery, but it still gives the illusion that things are getting better. In reality though they aren’t. How could they? Anybody that says they are is foolish. If we had a recovery where the US deficit was decreasing as well as the US debt, then I would say we are back on solid ground. But considering that we have had to increase the deficits even more, which only add to the total debt, then clearly we aren’t moving forward, rather going in reverse.

But like I said, it gives people the illusion, that’s all that matters. Gold will see through all of this. It will continue to gain ground as the debt load piles even higher. It’s too late to fix anything, inflation is the only way out. That’s exactly what is going on right now. Purchasing power is being wiped out everyday, yet most people are oblivious to this. The more the economy improves, the worse inflation is going to get. And the Fed can’t do anything about it either. If they raise rates then everything implodes again.