Summer and autumn 2008 was a bad time for gold and silver investors. This summer has been much better with gold emerging to break the $1,000 an ounce barrier and silver to poke above $17. Potential investors now want to know is whether precious metals has topped out or whether further upside exists.

Precious metals will surely become the currency of choice. Governments around the world are pumping money into their financial systems and boosting liquidity, which even former Fed chairman Alan Greenspan last week said he thought would end in inflation.

Having globally inflated asset prices with excess liquidity for more than a decade, Mr. Greenspan ought to know. But the question is still asked against which currency will the U.S. dollar devalue? There are huge debt piles all over the world and the Japanese economy, for example, seems in a far bigger hole than the United States.

Perhaps then they will all devalue against gold and silver, which cannot be printed or quantitatively eased. And actually we could well have falling asset prices and an even faster devaluation of currencies, or debt deflation. That is what happened in the 1930s in a similar contraction of global credit and trade, and the gold price soared.

Mr. Greenspan was wrong in the past about inflation, so why should he be right now?

No U.S. Recovery

Just look at the 263,000 extra jobless in the U.S. for September—worse than forecast, or the 23% fall in U.S. car sales that month as the government's 'cash for clunkers' program came to an end.

Clearly the fall in global trade is not going to be a passing phenomenon but a new economic reality for the emerging markets. In the Gulf States, the financial and real estate markets are already beginning to reflect this vision of the future, but are probably still some way from bottoming out.

So would it not be foolish to invest in emerging markets at this point? The volatility of emerging market economies is notorious, and you should wait for the right moment which will only come when today's investors have lost a great deal of money.

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