Right now the Fed is acting against possible deflation, deflating home prices mainly. The Fed is expanding M-3 growth while at the same time lowering short rates. This is good news for gold. But this can get even more dramatic if 2008 turns into a blood bath like some analysts are predicting. If the year does turn bad, then the Fed is going to increase what it is already doing to fight the problem -- you guessed it, more liquidity and lower rates. The perfect recipe for rising gold prices.

What we must also consider is the possibility that this year will not be nearly as bad as some are thinking it will. What is going to happen if we do see an end to the housing problems? After all, this is the scenario that we are all hoping to see. Let's say that the housing market does find its bottom. Housing prices will go up, the stock market will go up, and business around the world will start to accelerate. The result of this will be . . . rising commodity prices. So in this case, you also win.

So for now, it seems, at least to me, that gold is pretty much a win-win situation even at its current high prices. But I would love to hear from our readers. What are your thoughts on gold prices at these levels? How do you see the nation's economy performing during 2008 and what impact on gold do you see it having? Let us know your thoughts, we are curious to hear your 2008 predictions.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer