Let's say......

You own a small software company, XYZ which trades for $10 a share with a total market capitalization of $100 million. One day, IBM comes along and decides to offer $18 share in a pure cash offer to buyout your software company; this would cost IBM $180 million, which is chump change to them. You would naturally think XYZ would trade very close to $18, right? I mean, assuming XYZ's management agreed to the buyout, the stock would naturally go there.

What has been happening in the gold market over the last two days is the equivalent of IBM buying XYZ for $18, but instead of going towards $18, XYZ, goes down.

Yesterday, the FED created $200 Billion out of thin air in a coordinated worldwide liquidity dump. Before the announcement was made gold was trading higher by $12 and shortly after the announcement, gold spike to up $15. The dollar which was already down in a big way, fell further. But before you could say "damage control" the dollar reversed hard and gold came all the way back to the flat line.

IMO, in a natural free market, there is no way in hell this could have occurred. For gold, this should have been the equivalent of throwing gas on an open fire. Oh well, at least the gold stocks had a great day with the HUI up 19. I have never seen the HUI up that much with gold flat. But then again with the market up 400, there was no reason why the gold stocks shouldn't have been higher.

Basically what the Fed did was agree to exchange, from the major money center banks, any piece of paper that had a AAA rating into T-Bills for $28 days. The thinking would be to free up the log jam of some of this paper that cannot get accurate bids, because as we all know, most of it really isn't AAA. The Fed has agreed to monetize shit. Or you could look at it as one of the biggest bailouts in history. The Fed is not through by any measure.

Apparently MER and LEH (I think it was them) agree with me as they basically said the bailout plan wasn't going to work and this caused the dollar to eventually fall to a new low vs the Euro ($1.55+) and caused the dollar index to fall to an all time new low below 72.50. The low dollar also accounted for oil to go over $110, another record high.

One would think this would cause gold to soar over $1k. But this is the gold market silly. Gold eventually did close up some $9, but it was a tooth and nail fight. The gold stocks did ok, with the HUI down a point. Not to bad saying the market corrected hard today and after all it was up 19 yesterday.

So, over the last two days, there has been a massive worldwide liquidity injection, oil has hit $110, the dollar is cracking too new lows every day, and gold has been up a total of $9. Sound like a fair and open market to you.

You know what I look forward too? The day the dollar skyrockets, oil is down a bunch and gold skyrockets. That would be some day.

Do I really have to say it anymore? All roads lead to gold.