Will Bailout Part II Unleash The Mother Of All Gold Rallies?

Back in November 2007, I wrote the blog post below about Citibank, Goldman Sachs and Merrill Lynch all being on the verge of bankruptcy.

“Are Citibank, Goldman Sachs & Merrill Lynch All Bankrupt?”

http://goldsilverstockcharts.wordpress.com/2007/11/04/are-citibank-goldman-sachs-merrill-lynch-all-bankrupt/

And less than one year later, Bank of America was forced to save Merrill, Citi required 2 emergency capital injections, and Goldman a capital injection from Warren Buffett and TARP.

And now 4 months after Hank Paulson threatened America with “Martial Law” and flip-flopped from buying bad assets to injecting capital, the banking system is still in collapse.

Here’s a chart of the XLF Financial ETF since Paulson’s October TARP plan.

The XLF Financial ETF has lost 62% of it’s value since Bernanke & Paulson’s original TARP bailout. 

And while October, November and December were brutal for gold and gold stocks with the deleveraging of hedge funds and the massive withdrawls from mutual funds; gold has now  recovered all of it’s losses, and has broken out against virtually all major currencies, including the US Dollar!

And it’s been even better for gold stocks. Here is the HUI Gold Bugs Index for the same period.

The God Bugs HUI Index has now “doubled” from it’s October lows, while the S&P is down over -25% and the XLF Financial ETF is down over -62%!

Get ready for the Mother of All Gold Rallies, because its coming.

Michael Cerulean