DON'T fall into the gold bull inflation trap. For several weeks the price of gold has moved up. The upswing coincided with some other events, and especially inflation fears. These fears are based on a few minor irregularities that will prove insignificant. There is no fundamental reason for gold to change psychologically to a watershed event and indicate a change in the world economy from disinflation to inflation. The current inflationary feeling of investors is ill-founded. A few minor, weather-driven inflationary signals did occur, such as the White Typhoon which crushed Cuban sugar, southern US cotton and Florida orange juice. When you look under the veneer inflation is not the problem; the real problem is deflation. This column reported on May 2 that a scheme started by Mr George Soros, Sir James Goldsmith and the Rothschilds led to a rise in gold. Leon on Sunday was the first in the world to report that the gold scheme was mainly to enable the group to inject an inflation psychology into the public, with the real target being to make big money selling 30 year Treasury bonds, five-and 10-year Treasury notes (June contract) short. Now the scheme has taken an additional step as more Newmont stock has been sold, and bought by the Rothschild group. They plan a short-term big profit on gold, and a monster profit on the June contract of Treasury paper. There is no reason for gold to rise at this time except for Mr Soros' scheme, which will be effective only in the short-term. The only good indication for gold is the remarkably high amount of buying by Asia. However, even this is not enough to cause a real gold boom. The amount of inflation that now exists is insufficient to cause gold to rise. It is the character of the gold market to be subject to volatility. There have been many false starts to a gold rise in the last 13 years, but only one ever completed its bluff. Gold has never in history sustained a major bull movement without commodity prices and inflation also rising. Lately commodity prices in general have still been falling. There is a lot of inflation psychology today, but little real inflation. The inflation doomsayers are creating a mirage. With the Clinton administration's left-of-centre position, super high taxes, highly indebted governments and private economy, there is, in reality, more to be feared from deflation than inflation. Inflation will follow, but not yet. It is my belief that gold will surge a bit in 1994, and then go higher and higher from 1995 onwards. This is the time to buy blue-chip dividend-paying gold mine stocks, but do not buy gold bullion yet. This column recommended North American mining stocks when they were low, now they have risen about 300 per cent. They are still good speculations, but non-North American stocks offer better value. This column, on May 2, recommended selling the June T-bonds and T-notes short. You have made a fortune on this. This column also suggested gold bullion one year call in February, 1993. That suggestion was based on the exceedingly low price that gold call options were at the time. I am selling these at eight times the cost of each option; an 800 per cent profit. I suggest you do the same. I don't think gold will continue upward in a big way. Take your profit. High on the hog I JUST received the US Department of Agriculture annual April crop survey, which is released in May. The amount of soybeans, winter wheat, hay, sugarbeets, and cotton planted is all equal to 1992 this year. The only crops which have lower plantings in 1993 are corn (about five per cent less), tobacco (three per cent less) and oats (two per cent less). I don't see any agricultural product futures that offer a profit opportunity at this time. Hog, sheep, and lamb prices will rise but beef cattle prices will not change much, but steer and heifer prices are set for a rise. Long on palladium REGARDING futures on precious metals, palladium, where we have made so much money, is good for another contract; say September. Silver and platinum still have much room to move up. Buy September or December contracts long. Honeymoon is over THE Clinton administration has had its honeymoon period, and he flunked. The economy is already sick of Mr Bill Clinton. He is viewed as just another tax-and-spend president. Once again he has proved that it is impossible to create prosperity with high taxation. Mr Clinton talks much about reducing the deficit, and everyone seems to believe he is honestly talking about reducing the deficit. Looking at his budget it is obvious that what he really means is reducing the rate of growth in the deficit. His budget shows he expects to add to the US Government debt US$264 billion the first year, US$247 billion the second, US$212 billion the third, and US$214 billion the fourth (these are from his own figures and do not include off-budget debt or the hundreds of billions he plans to borrow from the Social Security Trust). Thus, assuming the economy continues to grow, which looks less and less a certainty, the deficit in four years will increase US$937 billion, which is nearly another trillion. Mr Clinton estimates that individual tax receipts will be US$515 billion in 1993 and he will budget US$295 billion in 1993 for interest on the Federal debt. This means 57 per cent of all individual tax will go to interest. Debt upon debt HOW long can the US dollar hold up under this drunken carousal of debt compounded on debt? How long will US institutions buy US Treasury bonds and notes? The final folly, how long will foreigners who own US$340 billion of US Treasury debt hold their bonds when they realise that the US government is operating a pyramid scheme. In the May bond auction it was necessary to raise interest rates to sell the bonds. Raising interest rates will do for the US stock market what concrete shoes do for mafia betrayers. The Wall Street Journal recently quoted Mr Clinton as saying he wants to grow the economy by taking money from taxpayers and giving it to the government to invest. The theory is that the government knows how to invest for a higher return than do millions of Americans spending their own money. If this were true the Marxist countries would be paradise. Leon Richardson is a well-known financial commentator and investor.