Gold just shot up something like 11.00 in the last hour or so. Thoughts, economic sages?

Not a sage, but I would figure that people are piling out of the USD right now and try to (temporarily?) jump into Gold and probably other commodities.

read the thread on the US bailing out Fannie Mac and Freddie Mac.
url=http://www.peakoil.com/modules.php?name=Forums&file=viewtopic&t=45012]link[/url]]

Very bad news. This means traders are attempting to liqudate other assets for gold. They are scared, and gold is the traditional repository for wealth. Problem of course is there only is so much gold, nowhere near enough to absorb the paper money (or digital money if you prefer) unless you priced up the gold at maybe $100,000 an ounce? Just a guess there.

Anyone buying gold (or silver) right now isn't buying the real thing, just certifcates that SAY they own it. You can't buy Krugerands or American eagles right now to store in your cellar safe. You are basically just buying more worthless paper if you do this.

Price on the precious metals will be bid up, no doubt. However, it does not really proivde anyone with liquid capital to use, and the metals themselves don't really hold THAT much value. Not all that useful realy. Only value is as a reprsentative of wealth due to their natural scarcity. However, they lose that value quickly if the economy tanks and people are hurting just to buy food.

Gold spiking up today means to me that on Monday the Stock market tanks. Maybe I am worng on this one, if someone can explain to me why that won't happen, I am all ears.

Reverse Engineer

How does gold "absorb paper money" when it performs it's "wealth repository" function?

http://bastiat.org/en/what_is_money.html

My personal opinion is this isn't that big a move in gold. It shot up about $13 last Friday only to drop. Everyone that has followed PMs is used to wild swings.

I agree with Seahorse. At this point it's not meaningful, although it could become meaningful.

Probably a reaction to the US government taking on the housing mess, with the inevitable further erosion in the dollar.

Reverse Engineer's comments about gold make no sense to me. Why are you buying worthless paper if you buy physical gold?

11 dollars is something like a 1% move.

Silver is down as I type. Any moves in the stock market or PMs are just noise, knee jerk reactions to the Fed taking over F&F. However, in my opinion, this can't be good long term, if for no other reason it only confirms the worse case scenario, a financial collapse, is unfolding and showing itself to be every bit as horrible as the pessimists have argued it would be.

The only question is can Paulson and the like contain the crisis? Read their comments even just last July about F&F, about how they were solvent, and tell me if you believe anything they say. This is bad, and bad cannot be good for the "full faith and credit" of the US dollar. Keep in mind that "no new taxes" is the pledge among the republicans right now. Anyone believe that? We either tax ourselves to death to back up the full faith and credit of all these F&F guarantees, the wars, budget deficits, and entitlement programs, or we literally have a run on the dollar. If we do tax ourselves to death, we may break the American economy. That assumes, of course, that taxing ourselves in a declining economy is even an option.

I hate to be pessimistic, but for two years now I've been waiting for any "optimist" out there to offer a solution. I see none. All I see are pages being turned on a world-wide nightmare.

I think the scariest part this is -> What happen’s if gold DOESN’T rise?

That would be the A-bomb to the economy, it would confirm we’re experiencing deflation, the worst case scenerio IMO!!!

Yeah 1-2% move isn't much. I would bet the price of oil goes down this week to calm things.

Update: Gold NOT on a tear! (breathlessly)

The performance of the financial, currency, and commodity markets this week is inscrutable to me. I.e., the continued fall in oil (and gold) prices even though Ike is headed straight for the heart of the Gulf. Or the strengthening of the dollar after the announcement that the US govt. was going to take on all that rotten housing debt. Or the stock market rising 300 points (on Monday) and falling by the same amount on Tuesday. It's crazy. But why should anything make sense, when we've established ourselves as thoroughly insane.

Heineken,

There's still de-leveraging going on, especially with many unnamed hedge funds.

Just look at 10 yr treasuries if you want a conundrum. They are being bid hard, even though we had the largest bailout ever over the weekend.

Virtual dollars are disappearing at an incredible rate, thereby making the dollar, in general, more valuable.

Until the unwinding shakes itself out expect more of the same.