(some) macro indicators

1) The 3 month libor rate is now down to 3.465% - it doesn't mean that lending is back to normal levels, but it is a indication that there are some baby steps with interbank lending (the recent crisis had spiked it to 4.8% from 2.8%)

2) TED Spread - this is the difference between the 3 mth libor and the 3 mth T-bill. We want the rate difference to be as narrow as possible. The lower the 3 mth libor rate then the more banks are lending to one another. The higher the 3 mth T-bill rate then less cash flowing into T-bills. What happens is the more demand for T-bills then attractive the government need to make the interest rate. The demand was so strong recently that the rates were actually negative temporarily - basically people were paying the US government for holding on to their money during this crisis period (I guess the thinking might have been that people were assuming that the US government could never go under, or would be the last in the world to go under).

Anyway, as we know, foreign money managers have been piling into the US T-bills during this crisis. However, they have to buy US dollar first (before buying T-bills), hence the gigantic spike in the US dollar and the subsequent kill off of everything else in the world (including gold and all other currencies except the Japanese Yen - more about the Japanese Yen carry trade in a second). This is why a high T-bill rate is important to us. It is currently still well below 1%, hence we are still seeing that strong US dollar.

Prior to the recent crisis, the TED Spread was around 1%. Currently, it is 2.62%. At the peak of the recent crisis the TED Spread was around 4.5%. As such, it has come down quite a bit, but that's primarily due to the improvements in the 3 mth libor rate. The T-bill rate has naturally improved also, but not nearly at the same rate. We need to see the global money managers slow down quite a bit more in moving their money into T-bills.

The Asian and European markets were relatively calm overnight. Hopefully that's a step in the right direction. The US dollar seems to have slowed down just a tiny bit this morning. Right now, it's all about stopping the bleeding being done by the US dollar (even if the US dollar doesn't pull back immediately).

3) Yen carry trade - it may have become obvious that the hedge funds and other players used the weak Japanese Yen over the past few years to fund their massive commodities purchases. With the recent market crash, and the massive commodities price decreases, it appears as if these players have had to sell equities, gold and everything else (including the kitchen sink) to cover Yen positions.

Every currency in the world have gotten slaughtered recently by the strength of the US dollar, with the exception of the Japanese Yen (which actually has killed the US dollar in terms of performance). On the surface, it makes absolutely no sense that the US and Japanese currencies are so strong, especially given that these have been the 2 lead countries in monetary injections into their respective economies (the Japanese economy and investment markets have been completely slaughtered recently). However, we already know what's driving the US dollar strength. Now it is obvious what has drive the Yen strength - carry trade.

There seems to be a bit of easing over night. Prior to the recent crisis, the Yen (per US dollar) was around 106. Remember, the lower the ratio then the stronger the Yen. It went fell all the way down to about 92 recently. Right now it is 95.265. We need to see this continue to increase. The more it increases then it likely means the less hedge funds and other players will be selling gold.