One of my associates wrote in the Discourse before the Friday session started that he was taking part positions in a few leading gold producers, including GG, following the early sell-off that was expected. The price of GG hit that low of $18.56, however, it closed the day at $20.09.

Is gold ready to fly, which is necessary for the goldminer Bull to start his run? Gold, silver and platinum prices were hammered on Friday, so I believe there will be lots more sell orders – some from margin calls – on Monday, for both the gold futures and the goldminer stocks.

On Friday, however, I noted that palladium was up almost +1.0% and copper jumped +4.2%. But, why would these economic metals be jumping when the economy is supposed to be going to hell in a hand-basket as the messages from Princeton, Harvard and even the Fed’s Bernanke are saying?

Prices move one way or another when the beliefs of the buyers or the sellers are greater. On Friday, there were believers in copper and palladium. Now, I won’t trade copper because, as you know, I don’t work in Zug Switzerland or trade at Mick’s desk in London. But, I know enough that I have to keep my eyes on the prices of the economic metals and particularly the mining giants that produce them as well as my ears closed when economists are doing most of the talking on TV.

Call it experience.

My gut tells me that (i) ultimately several trillions of reflation by each of the US and Europe plus lesser but still huge amounts by other governments must be priced into gold, and (ii) the gnomes who make these things happen (remember the FIFO rule as well as the Golden Rule, ie, those who control the gold make the rules) are awaiting the outcome of some $400 billion in Credit Default Swaps that get presented at the closed teller window of bankrupt Lehman Brothers early this coming week. Will the US Treasury, Fed, FDIC and HB&B step up to the plate and catch the ball. I think they will, but the possibility of their dropping it has traders on edge.

I mean, what’s another $400 billion when there is already five times or more in the ante. The players will call, and then the rest of us will get to see the result. Of course, not being in the room, we don’t get the telephone call. We have to wait to see the share blocks being bid or offered by the gnomes.

Capital market prices are always on a hinge. At certain points, when trends and cycles are in the process of turning there is extra volatility when the major forces in the market duel it out. Right now the Bears are very strong in the precious metals because they have the backing of the US Administration, the Fed, HB&B needing a stronger $USD to allay the fears of the public and their creditors around the world that the $USD is going to collapse because of this Paulson Reflation Program, the likes of which nobody has ever seen before.

My bet is that the Interventionists get to save the financial system, but the cost will be humungous. To hedge the weaker USD, traders have been hopping on the bullion train. Paper gold, ie, ETF’s and futures, has been rejected for now by independent traders. The chosen hedge is real gold, the physical bullion. It can’t be printed from trees, like fiat moneyThat’, ETF’s and futures. That’s obvious to the public because the bullion and coin suppliers have run out of inventory to sell.

Something has got to happen. If the Interventionists keep forcing the gold price lower, yes the hurting public will pawn their gold, believing the price will never return to its former glitter. But, at some point soon, the goldminers will stop production, conserve their cash and wait out the ultimate pressures of the Paulson Reflation Program, which will return gold to prices above and beyond anything seen to date.

So the system is really screwed up. Traders are waiting for an outcome. Those who have no debt are in the fortunate position of not having to panic and kowtow to the Golden Rule.