Gold finished trading in New York on Friday at $956.40, down $12.70 and silver fell 53 cents to 18.12. Gold traded sideways to slightly up in Asia before rising in early European trading by nearly 1%. Despite the very sharp fall in oil prices and other commodities last week, gold only fell by 0.2%. Silver was down by 3%. August Crude fell by more than 11% - it fell $16.34 from over $145 to $128.74.  And Prudent Bear’s Doug Noland points out that August Gasoline sank 11.5% (up 27.8% y-t-d), and August Natural Gas dropped 10.2% (up 42.9% y-t-d). September Copper declined 1.9%. September Wheat fell 3.2% and August Corn sank 11.8%. The CRB index was hit for 7.4% (up 19.1% y-t-d). The Goldman Sachs Commodities Index (GSCI) sank 9.5% (up 30.5% y-t-d and 55% y-o-y). With oil above $130 on concerns regarding Tropical Storm Dolly, the first storm of the coming hurricane season and the dollar having fallen against the euro, gold is up marginally today. Gold’s safe haven attributes are coming into their own due to significant macroeconomic and systemic risk. While demand destruction may lead to falls in the demand for commodities, gold’s finite currency credentials will lead to it continuing to outperform other assets in the coming months. With conditions quite similar to those of the stagflation of the 1970s, this is particularly the case. Although it is difficult to see how oil, energy and food prices could be subject to significant demand destruction given the massive demographic, social and economic ramifications of the emergence of huge middle classes and western consumerism in Asia and the BRIC economies. Also the increasingly accepted theory of ‘peak oil’ should give pause for thought to those who have been and continue to always bang the drum that the commodities ‘bubble’ is bursting (stock market permabulls are particularly prone to this deluded form of wishful thinking). This mantra has been sung for some years now and its proponents remain in denial about these huge social and economic changes in the global economy. Deflationary Recession/ Depression Versus Inflationary Recession/ Depression? A recession has clearly arrived in the UK, U.S. and many other economies internationally - the question is how deep the recession becomes and whether a recession leads to a 1990s style Japanese deflationary recession, a 1930s style deflationary crash and depression or a 1920s style German hyperinflation. Most likely is a severe 1970s style stagflation with a combination of sharply falling asset prices and economic growth with competitive currency devaluations and very severe inflation in the price of essential goods such as food and energy. Today, due to our modern non Gold Standard monetary system deflationary recessions or depressions are highly unlikely. The U.S. experienced a deflationary Depression in the early 1930s as it was the world’s largest creditor nation and it was on the Gold Standard – meaning that every dollar was backed by gold. Therefore all assets and the price of goods fell in value vis-à-vis money and vis-à-vis gold – gold was money. The last time the U.S. experienced a serious recession since the advent of the fiat paper currency system was in the 1970s and it was a period of stagflation. Since the ending of the Gold Standard and our modern experiment with paper currencies there have been few experiences of deflationary depressions – Japan’s ‘Lost Decade’ being the one of the very few. Japan experienced deflation at it too was a massive creditor nation with large exports, huge national trade and credit account surpluses, huge savings rates (savings rate of 15pc versus a negative savings rate in the U.S. today) and thus a sound currency. Thus prices of assets and goods fell in terms of their sound currency – the Japanese yen. The U.S. is today the largest debtor nation that the world has ever seen with a massive and exponentially increasing national debt, massive trade deficits and significant and growing current account and budget deficits. Thus, it is highly unlikely that there will be deflation against this fundamentally flawed economy and currency. This could only happen if Ben Bernanke and the Federal Reserve became determined to tackle inflation (a la Volcker in the late 1970s) and increased interest rates to well above 10%. This is highly unlikely given the extent of household and national debt in the U.S. Thus a period of stagflation and even hyperinflation seems increasingly likely and investors and savers should prepare themselves accordingly. Gold's Performance as a Safe Haven Asset An example of gold's historic role as a safe haven asset is seen in the following data. The industry performance of Physical Gold Versus the S&P 500 during eleven stock market declines of 15% or more in the Post-War period (since 1946). Today's Data and Influences We have few releases on the data front at the beginning of the week; the main focus will be towards the end of the week with the release of the German ifo Business Climate Index, U.K. Retail Sales and U.S. Existing Homes Sales on Thursday. On Friday we have the publication of U.K. GDP, U.S. Durable Goods Orders and U.S. New Homes Sales. With no major economic data release today (only U.S. leading indictors for June) earnings reports and the performance of the stock market will likely be focused on today. Most Asian markets were up except for the Nikkei and most European markets are up so far this morning (except Spain). Gold and Silver Gold is trading at $965.20/966.20 per ounce (1145 GMT). Silver is trading at $18.65/18.70 per ounce (1145 GMT). PGMs Platinum is trading at $1865/1875 per ounce (1145 GMT). Palladium is trading at $420/425 per ounce (1145  GMT).