Good Afternoon,

Forty-eight hours ago we wrote that "gold, it must prove that it is made of the hard stuff and it is under direct gold bug pressure to quickly recapture $800 and then at least $845. If in fact this is the TEOTWAWKI scenario for which they were loading up of late, then the time has come -and then some -to reap such benefits." A near 12% ($90.00) meteoric rise in the metal today should more than validate any such expectations, as it represents the single largest one-day move in dollar and percentage terms as well. The day began on a positive enough note, but things quickly spiraled into a storm larger than any in recent memory. As well, as any in not-so-recent memory. Like that of January of 1980. As then, we have a combination of outside, and outsized events coming into the picture at once. As then, we will have renewed calls for $1600 or $2200 gold. Unlike then, there is no inflation spiral but more like the opposite process.

We cannot address or base findings on trading room rumors and would rather wait for confirmation on particular stories, but the trigger for today's move may well have been the talk on the street that UBS was looking for 'help' from the Swiss National Bank. SNB has denied the story. Market psychology now has people starting to mention names that they have ever had grudges against and that is quite dangerous. Take that kind of potential headline, couple it with a money-market fund halting redemptions, add the Russian markets crashing, and top it off with the Dow losing 451 points at one point during the day, just after AIG's demise was averted yesterday. Proposed stiffer rules on 'naked' short-selling may have had quite a bit to do with equity position unwinds as well.

Tiny market such as gold's only needed a relatively small injection of buyers' money to make the type of move which we have been witnessing today. As we wrote the other day, the surprise was that it took so long to see a move of this magnitude. We are waiting to see if today represents the oft-predicted de-coupling of gold from its primary reliable price-moving (oil, dollar) agents. Thus far, a $6 move in crude and a 0.99 drop on the dollar index would not bear out the advent of such a new reality. But, the stage is practically set for such an event. Unless of course, other things happen in the interim. Our expectation is another salvo from the Fed and -more so- from the SEC. Here is a prediction: Short-selling stocks will be curbed or halted by Friday. Deleveraging could take on a whole new meaning. So could risk. News flash: WaMu has begun the "auction process." Read; It is offering itself up for sale. Will we see lines outside its branches in the morning?

We are quite pleased to finally see such a positive reaction from gold and silver, as well as from gold mining shares, given the global market and economic circumstances. Whether or not the rally is broad-based retail buying or just another profit-oriented fund play, remains to eventually be seen. There is ample evidence that it is a combination of both but we cannot determine the ratios. Floor talk was that some pros were selling quite a bit into this rally. Some of the move was also an overdue correction of the two week-long fall the metal had previously experienced. Research by specialist firm GFMS indicates that miners may be cutting supply and that central banks are not keen to sell at a time when seasonal demand is set to start. Coming at this juncture of the credit debacle, this could be a supportive factor for gold in the year's final quarter. Most of the support at this juncture however is being lent by the obvious gorilla in the room: its name, PANIC. The next set of questions relates to whether the arm-wrestling match between the inflation versus deflation-forecasting scriptwriters shows a result soon. For now, the only certainty is the lack of confidence in markets. As that goes, gold is not to be outdone by any other barometer of such an emotion.

Silver rose to $12 gaining 15% on the day. Platinum gained $70 to $1100 and palladium climbed $19 to $241. All of the recent hoopla about the silver market's putative price "suppression" by certain entities has yielded some cogent responses from people who have been watching and writing about the metal for quite some time. Dr. Gary North has published two articles debunking such theories. Yesterday, we received a video rebuttal from CPM Group New York. We have posted it in this section (see below) as well as on kitcosilver.com - You might want to take a look and listen in order to learn more about your favorite metal and its related market.

A sleepless night will follow for many a trader and monetary authority. Let's not use terms like 'overbought' or 'oversold' as they would have little meaning to different values now seen in various assets. Take the charts, crumple them up. The psychology of investors is the only item of significance as regards the next turn in these markets. And that, largely depends on what they see/hear from those who have been entrusted with the management of their money. As a taxpayer, and as an investor. Keep an eye on names and acronyms in the news: WaMu, HBOS, JPM, UBS, SEC, FED, DOW, GM, AIG, GLD, SLV. They will have big roles to play in coming days. Your 10-15 percent core gold positions should not have to be mobilized unless you have sustained deep losses in equities or other sectors. If you do not yet possess the insurance policy that gold can be, it is never too late.

Sober Trading.

PS - Rumors of my demise (what timing!) have been greatly exaggerated, due to my being absent from the Silver Summit. I trust that my physicians will be able to get me out of the wheelchair I am currently sitting in due to what is (hopefully) nothing more than a slipped disk, and that I am able to make the Toronto show in a couple of weeks. In the interim, the good news is that I can spend a great deal of time sitting in front of the keyboard. In fact, sitting is all I am able to do.

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal