Gold closed at $897.90, up $41.10. The dollar closed up 0.03 to close at 85.52. The Dow closed at 8077.56, down 45.24 and the Transports closed at 2965.89, down 66.71.
Ex-Fed Chairman, Paul Volcker was introducing Tim Geithner at the Senate Confirmation Hearing of Tim Geithner for Treasury Secretary. Of Course Geithner was the Former President of the Federal Reserve Bank of New York. I think what Volcker said was the story. Again, Volcker was the Federal Reserve Board Chairman from August 1979 thru August 1987. The Wikipedia had this to say about Volcker, “Volcker’s Fed is widely credited with ending the United States’ stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.”

Again, I am more interested in what Voclker said, than I am Geithner’s appointment. Volcker said, “You know a good many years have past since I last appeared before this committee, but during all of that time, there’s never been a more critical time for the American economy and particularly for financial stability. That’s true just not in the United States but globally. To put it starkly, we are in a serious recession with no end clearly in sight. The financial system is broken. It is a serious obstacle to recovery. There is no escape from the imperative need for the Federal government to come to the rescue, to right the economic and financial ship. Over time the hard fact is that several trillions of dollars will be necessary to be committed in a combination of budgetary expenditures and various guarantee insurance programs and extensions of credit by the Federal Reserve. Obviously, commitments made of that magnitude raise very large questions. They are not only questions about avoiding waste of the tax payer’s money, important as that is. There are also risks of undermining confidence in the dollar and raising fears of future inflation, they need to be recognized.”

That was Volcker; let me tell you what I believe. I believe gold is going to discount (look into) future inflation, in other words the markets always look ahead, this is the big money and it always moves first. When it does, gold will be off to the races, BIG TIME! I also believe that the speculators will begin to turn to gold as they turned to the NASDAQ and internet stocks during the Dot.com bubble and as they did with housing and oil. In essence, what Volcker is saying and you have heard it for months now, is that the Fed and the Treasury are responding in unprecedented ways to stave off another Great Depression. Trillions are beginning injected into the financial system and the economy. Banks are being nationalized, our major car makers are being bailed out and the Banks appear to be in more trouble than they were a few months ago at the height of the crisis. This means banks are going to need even greater injections of money. There are also currency concerns all over the globe. This I believe will be good for gold!

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