For the longest time ( and yeah, I’m talking 25 years) no once cared about gold. When the NASDAQ was going ape, gaining 200 points per day back in 98/99 gold was so forgotten that the average person didn’t even know it existed except for jewelry. It appeared like the fiat currency was actually working perfectly, the central planners had everything figured out, and there was nothing but blue skies and green grass forever. But then over the next ten years a lot of things changed. We saw the NASDAQ crash. We went to war in Iraq. We had the single biggest credit explosion in history. We saw a real estate bubble larger than Japans. And then of course the whole house of cards fell down.

During the early days of the 2000′s I couldn’t get anyone to even consider gold. I pounded the table, I hooted and hollered. I told anyone who would listen, to the point of being obnoxious that buying gold was going to be the single best investment they could make. No one listened. ( well, few did anyway)  Then of course it started moving up. In 2000 I started picking up rounds and bullion at under 290 the ounce. As it crawled higher and higher I kept telling everyone that gold would see 1000 before the end of the decade. I might as well have been trying to explain the theory of relativity to a garden slug. No one could even imagine it. Gold was a "barbaric relic".

400, 500, 600 it climbed. Slowly people started to pay attention. But frankly no one was really buying. already up hundreds of percent the next argument was "it’s too high, it’s going to come down". I bought more and more. It really wasn’t until gold popped over 900 that people started to think "hey, maybe this gold thing has something to it". I can make the case both via bullion sales, coin sales, and ETF buys that the BULK of the people didn’t buy any until it was 900+.

Then it spurted over 1000 and quickly ran to 1200. Those late to the party felt pretty good about things. Those "really late" who bought at 1050, 1100 and 1200 got real nervous real quick when gold quickly retraced. In a matter of days, my email box was flooded with latecomers asking if they should sell, is gold over, did they make a mistake, what’s next, and a host of other questions. I can’t lie to you, my first reaction that I muttered to myself was "where the hell were you for the last 600 dollars???". But that’s unbecoming and I went on to answer people as best I could.

Here’s the deal. There are TWO VERY BIG DIFFERENCES going on in gold as we speak. 90% of the investing public is buying it to "make money" on the big move to 1500. That is NOT why you should be buying gold. It’s not a stock to be traded and flipped. You buy gold for reason number two…it is MONEY. It’s the ONLY MONEY. When Bernanke’s worthless "Federal Reserve Notes" are toilet paper, gold will still purchase "stuff".

If you took 1000 dollars in cash in the year 2000 and put it in your mattress, it would not buy as much in 2010. According to the Fed’s own website it would take 1,249 dollars to buy the same amount of goods. If you bought 1000 dollars worth of gold, Guess what? Yes indeed, you’d be able to purchase 2,333 dollars worth of product. That is what gold does, it preserves buying power.

Now of course we do have the issue of "last man in". No question. If you were the unlucky soul that made your first purchase at 1250 dollars, you have lost buying power as gold dipped. Not only that, gold could dip more, much much more. So, you could panic out and sell it, taking the loss, or you could take the long term approach and even buy more as it dips. Which one will be the way to go?

Let’s take this approach. Because so many traders and part time investors finally found gold, the ETF’s like the GLD have had to buy tons of the stuff. Supply and demand suggests that if they need tons, it leaves less in the market and the price rises. So is it silly to think that as people run away from the gold ETFs gold may sink? No it’s not silly. In fact, there’s very powerful people that want gold down under 1000 anyway. First off the criminal bankers that have had gigantic short positions would love nothing more than to be able to get out of some of those on the winning side. So, they will do all they can to push it down. But you also have an entire world who understands that gold is money, not a trading vehicle and want to buy it. China comes to mind. India comes to mind. Russia comes to mind.

Would China rather buy gold at 1200 or 900? Duh.

So, despite the fact that Tuesday gold had a nice day, moving back up quickly and hitting 1080, there are pressures against gold right now. The commercial banks want it down. China/India/Russia wants it down. As the latecomers sell the GLD, more will come to market. So yes folks, gold could trade under 1000. It "could" come down to 900. God forbid we start a war with Iran, because more people will flock to the US dollar as some form of perceived safety, and when the dollar gets strong, gold will go even lower.

So what do we do? Do we sell out? I personally won’t. I don’t have to. 90% of my ownings took place when gold was under 500. But what if you’re a late comer? Do you sell out and take the hit? That’s something you’ll have to decide on your own. My personal thought is that gold is still going to 1500 and probably 2000. Yes it might go to 900 first, but as Greece, Spain, Italy, Ireland, Portugal, Dubai, and a zillion other countries show you, fiat money is imploding daily. Gold will be seen to be the ultimate money at "some’ point. So, selling and taking a hit, only to see it much higher in months, would not make sense to me.

Yes gold is hated by banks. Hated by Federal Reserves. Hated by Central banks. Gold is "anti money" to these fiat creeps. It will take hits, and be ridiculed. But ask Dubai if it would have rather had 20 billion in gold, or 20 billion in currency. I think you know the answer.

Gold answers to no one. Gold carries no debt, no derivatives. You can’t print it, or push a button and instantly "have some". It doesn’t gain interest, but it doesn’t owe anyone any. It is the perfect money, and once the "traders" are gone, those who understand what it really is, will accumulate more. I’m one of them.

Don’t forget folks, what you are witness to is the end result of about 40 years of fiat money  experiment. Never before have the major powers all been on a Fiat currency at the same time. As much as you’ll hear all this baloney about how the debts dont’ matter, and how Greece is no big deal, the real bottom line is that it’s a massively big deal. It wasn’t long ago the richest area on the planet, Dubai went belly up over loans they couldn’t pay. Now it’s the PIIGS. But let’s not fool ourselves. We are going to bail out the PIIGS with money we don’t have. More bogus, hocus-pocus money. And all of it will come with debt stapled to it. They’ll play this game out over and over, but as you can all guess the pressures are building and one day will pop. Gold will just be sitting there, smiling. No debts on it, no interest, no derivatives, no mark to model, no "nuttin". Just Gold. Money. Like the kings used for a zillion years.

In the short term, Gold can get kicked around. But here’s the shocker folks. There’s going tocome a time when all the major currencies simply implode. Some of the Global planner lunatics will want a new currency based on Global carbon credits or some other such elitist BS. But I tend to think saner minds will realize that just to make the system work after everything blows up, a currency based on some percentage of gold makes the most sense. Let’s see if that happens.

Now onto the market:

Wild was the word. Friday, we opened ugly and it got uglier. We fell 167 points before the plunge patrol team made a heroic effort to rescue us and send us positive on the day. One may have thought a bit of momentum would carry forth and Monday might be "up" but no, we fell back 103. Then out of the clear blue, Tuesday greets us with big bright futures and an hour into the day we’re up 160 points. Can you say "volatile?" How about Choppy, sloppy and bizarre? All the above.

This is the kind of action you see when markets are so completely disjointed that the no longer resemble normal. It wasn’t long ago that Dubai imploded, and people asked about Sovereign debts. Then it was Greece’s turn to say "hey, we’re broke, come rescue us". But they are just another cog in the great wheel of debt. What happens to Ireland, Spain, Italy, Lithuania, and the multitude of other nations mired in debts they can’t pay? So the word on Tuesday was that somehow some way the IMF and the EU would come to rescue Greece. Yippe. Whee. Where’s that money come from? And how soon before that’s gone? Don’t get me started.

Today the market looked like it might try and move ‘up" but with New york in a blizzard and DC in a blizzard, (and me in a blizzard) the market was only half manned and volumes were light. So, we spent the bulk of the day basically flatlined. Now of course the big question is…what the heck happens now? Was this sell off just some quick correction and now we’re off to the races again? I think not folks. I think the market has much lower to work. A better question might be, how low do we go before the first really big reversal higher that adds several hundred points over a few days? That’s a tough one.

When the market topped out at 10,700, the first thing we did was take our profits in our trading accounts and sit on our hands. Then as the market came off, we moved all our money out of funds in our 401K, into cash. But we didn’t go short, and many people have asked why. Well there’s two reasons folks. One is that for 9 months every time the market looked ready to roll over, it blasted higher, making fools out of the shorts. But reason two is more important. It is now common knowledge, even by such well respected outfits as Trim Tabs that "normal supply and demand" doesn’t explain away some of the big moves. Without stating it as blatantly as we do here, they basically said "Uncle Sam is making the market move".

Then we showed you that futures chart a while back. Where one day the market looked as poor as it could look and was poised to simply roll over, and out of the clear blue "someone" bought many thousands of  futures contracts and goosed the market back up. Then on CNBC one morning a floor trader at the CME says that "someone" stepped in on another instance and bought 228K futures contracts, which of course sent the market higher instead of falling. Then we had last Friday, where 167 point loss was erased in under an hour, again by some  tens of millions of dollars worth of futures buying.

Let’s cut to the chase here. I’ve told you all for years that Uncle Sam, via her Presidents Working Group has been actively in this market. Remember last year when we quoted Bernanke "Consumer confidence will rise with the gradual rise of the equity markets". How did he know the equity markets would rise??? Easy. He gives banks the money to play in the market. They are the mysterious futures buyer.

Now when supply and demand is nothing more than some old theory taught in economics class, and a madman with a printing press can toss untold millions into the market and "create" a rally, it makes shorting sooooo incredibly scary. Yet going short is indeed what we will have to do. We did it for 90% of 2008, and I think we’ll be short for at least 50% of 2010.

But as you might imagine, we like to institute short sales ( or the buying of inverse ETF’s) AFTER a good bounce. Imagine this, we were at 10,700 a few weeks ago. Now we struggle to hold 10K. If the market ran to 10,500 I’d be shorting with both hands. But these one day pops that fade the next day, get worrisome. Any one of them could develop into that 400 point run.

Tomorrow there’s an EU summit as they try and figure out what to do with Greece and the other PIIGS. The market could get wickedly volatile depending on what comes out of that little chat. If you are not an experienced "trader" then please don’t get too involved with anything just yet. We need to move over, OR under some big time numbers before we make any big bets. For the time being, just sitting tight, or picking off small position longs and shorts makes the most sense. Don’t worry, one thing about the market is that it always resolves itself to doing "something" and we’ll know soon enough what that something is. I tend to think we’re on our way to DOW 9600, but boy I’d like one last blast higher before we get there!

Have a great day, and for all of you who are in the same Noreaster boat as us, take care and be safe. I’m just as tired of this as you are, believe me!