time for round 2 the drop to 630, page-32

find8,

correct!
We recently saw strength in the USD. The reason is simple:

The Situation
1. The US had to put trust back into its currency.

2. China has $380 Billion worth of Fannie and Freddie bonds.

3. Fannie and Freddie bought half the mortgages in the US, and sold them on as bonds. The mortgage crisis in the US is ongoing.

4. If Fannie and Freddie failed to pay the interest owing on their bonds, why would sovereign wealth funds trust the US?

5. If Fannie and Freddie failed to pay the interest.. there would be massive repercussions in the CREDIT DEFAULT SWAP market. This market is $61 Trillion big.


The cure
the US Fed was forced to guarantee the bonds to avert:

1. A lack of liquidity in the Credit Default Swap market, with massive ramifications on payouts because of the 'default' event.

2. Maintain trust in the largest US bond markets to sovereign wealth funds.

Outcome:

With trust re-established, the USD rallied.
This is not a Gold fall, because as you point out, Gold has actually been stable in terms of other currencies.
What we have seen is a resumption of confidence in the USD.

What is interesting this time around.. is that gold did not fall last night.

Joel