Reference your thoughts on base money. A definition from Wikipedia follows:
M0 being just base money (coins, bills, and central bank deposits). M0 is also money that can satisfy private banks' reserve requirements. In the US, the Federal Reserve is responsible for controlling the money supply.
You will note that the sums deposited by the private banks with the Fed have risen from $8 billion in September to around $600 billion in November. This is part of the money paid by the Fed for commercial paper from the private banks. This money was just recycled to the Fed. It serves the primsry purpose of stabilising the private bank balance sheets.
It does also push up the money measures such as M0 or base money but it is not available to the lending side of the private banks. The impact of these extra funds is still to be seen as Act 2 of the Bernake game plan.
Gold is reacting currently to the rise of the Euro against the dollar and the new demand from western private investors. Against this is the fall in purchasing power of the oil states and western consumers.
