[Micki]

It is a war out there.
As I have been following Gold for a few years now I am used to completely counterintuitive moves. But now you got a lot of CB's, PPT, Treasuries etc. trying to keep the wheels on the cart.

I mean, look at gold. Yesterday it touched $927 and now it is pushed down below technically important $900 level (currently $884). Did something fundamentally change that gold negative?
I don't think so.
Similarly did we have some change that is follar bullish? Nope.
If anything , the lack of bailout has significantly increased the chance of a rate cut, something that we probably wouldn't have had for quite a while if the bailout had gone through.

Either that or just tune in to Kudlow on Bloomberg for alternet more mainstream explanation.

[smallpoxgirl]

Well...considering I'm pretty deep into UDN I've been pondering that a good bit too.

For one thing, I think that a lot of these stories about "Fed Injects Liquidity" can be pretty misleading. They don't actually involve creating money. The money supply is up very modestly from a year ago. What the fed is doing is shuffling money and trying to feed it to failing financials. They are also using the Supplementary Financing Program pretty aggressively to strip money out of the money supply. The other thing over the last 48 hours is that the European and Asian markets took worse hits than we did.

Gold is dropping too, so it's hard to write it off as just the dollar looking better because the Euro et al are looking worse.

[MD]

Does anyone really have a clue?

I think not.

[peripato]

Foreigners, who are propping up the US economy with tons of loaned money, are relieved that in the short term US government action (all the bailouts) means they can keep selling Americans shit they can't afford any longer.

[firestarter]

These CB injections are merely circle-jerks.

As for the dollar strength, it's essentially a dollar/ euro thing-- speculating that ECB will be cutting, along with Fortis on the verge of going TU, not to mention the House vote against monetizing toxic securities.

[Jotapay]

People are hoarding dollars. Plain and simple. People aren't selling them. There was a Forex trader on Bloomberg talking about it last night around midnight.

[misterno]

The problem started from the US so the US economy is in danger

Investors think that the crisis might spread to whole world and they bring their money to US, thinking that in any event US will alwaybe safe heaven. That is why USD is going up.

But it does not make sense. Because US is the one who has a problem not other countries.

Stupid economy + stupid people = Sheeple mentality

[oswald622]

i think someone else said it - because the bailout didn't pass. by not taking on that additional debt, the US government looks more fiscally sound.

also, the bailout was much, much bigger news than the $630 injections.

[Delphis]

For one thing, I think that a lot of these stories about "Fed Injects Liquidity" can be pretty misleading. They don't actually involve creating money. The money supply is up very modestly from a year ago. What the fed is doing is shuffling money and trying to feed it to failing financials. They are also using the Supplementary Financing Program pretty aggressively to strip money out of the money supply. The other thing over the last 48 hours is that the European and Asian markets took worse hits than we did.

Ahhhh, like the shell game, only there is no ball under any of the shells...

[Dreamtwister]

I just assumed the index was up because everyone else was printing money just as fast (or faster) than the U.S. in order to maintain their pegs.

[Polemic]

MY Simple Theory:

Something around $700 million 'injected' this week...

Today's Dallas Morning News headline, "$1.1 Trillion Lost!" in HUGE bold letters.

-$1.1 Trillion + $700 Billion = -$400 Billion

$400 billion was removed from the money supply (in theory.) Less dollars in circulation makes each dollar remaining more valuable. This is deflation and bullish for the dollar index.

Or maybe I don't know what I'm talking about.

[Polemic]

I've long held the notion that Ben Bernanke, a scholar on the Great Depression, was brought in not to prevent deflation, but to mask it.

Sure he said at Milton Friedman's birthday that, "they would never do it again... (referring to the deflationary Great Depression in which the Fed removed 40% of the money in circulation during 1929-1933.)"

But he was probably lying. The "Helicopter" speech and nickname was probably a rouse. A psyops meme.

Being highly cynical of peoples' intentions has rarely let me down.

[smallpoxgirl]

$400 billion was removed from the money supply (in theory.) Less dollars in circulation makes each dollar remaining more valuable. This is deflation and bullish for the dollar index.

$400bn would be about half the US money supply. Half the US money supply didn't disappear last week. Neither did the Fed add anything near $700bn to the money supply. I think you really can end up chasing your tail if you try to understand what's going in the economy based on the newspaper headlines. Big numbers grab attention and sell papers, but don't accurately reflect the nuances of what's happening.

[Polemic]

You're probably right that my numbers are wrong. It's still possible though that more electronic money is being destroyed than created.

[Ibon]

This is not my area of expertise. It would be great to have Mr. Bill way in on this but I did have some inputs recently from overseas.

There is a lot of inertia in the global financial system, gigantic dollar holdings and treasury bills, deep historic relationships, huge vested interests, and no viable alternative still to the US dollar. I talked recently to a hedge fund manager in Switzerland who is an old friend who was challenging me not to be too overly bullish on gold or so bearish on the US$. Where should Europe put their investments for example if they pull out of the dollar. In China? What guarantee of stability?

We do know that central banks coordinate their actions. Just imagine how vested interests in many countries would intervene to not allow a rise in gold prices to undermine global currencies. An undermining of stocks and currency would be so negative to so many vested interests that even if fundamentals point to gold values going up because we are printing money it wont happen that easily. Same goes for interventions to keep the dollar propped up.

Who has more to lose? A few contrarian gold investors or the huge vast vested infrastructure whose wealth and economic strength depends on it?

Remember how people don't often understand peak oil because of the issue of scale. How we cannot scale up alternatives. Apply the concept of scale to gold and the dollar. It is related in that at this time China or Europe or central banks would lose alot more abandoning their currencies running to gold or abandoning the dollar.

Until they have more to lose not investing in gold or not dropping the dollar the vast vested interests in the financial world will continue to support the dollar and undermine gold even if the fundamentals seem to contradict this.

This makes sense to me. We are seeing how totally screwed up our government is and our economy and this creates a bias against the dollar and for gold from our provincial american view of things. Stop a moment and look through the eyes of foreign investors and look at the vast inertia of where investments are currently being held.

From the above logic I have come to the conclusion, maybe completely wrong, that we wont experience a total melt down of our financial markets. just a very painful long drawn out weakening as transitions toward other currencies or toward commodities or gold will be engineered to not allow a complete loss of wealth from so many with vested interests and power who will want this orchestrated.

I wonder if we really are capable of unorchestrated markets anymore?

[Micki]

Until they have more to lose not investing in gold or not dropping the dollar the vast vested interests in the financial world will continue to support the dollar and undermine gold even if the fundamentals seem to contradict this.

Just to add one comment.
If you look at the timing of gold sales you will see that a large portion of the dramatical drops happen outside normal exchange hours on the thinly traded Access market.
This means that who ever is selling is not interested in getting the best price as the trade in that case wouldn't have been put through on an illiquid market.
This also suggests that the selling is done by limited number of players achieving maximum effect with least possible ammo.

This in turn sets off stoplosses. So when traders enter the next exhange session price is already way down and positions have been closed and/or margin calls are coming in.

This happens over and over and over. I've been watching this type of action since 2005.