The currency markets reaction to the Federal Reserve’s recent interest rate cuts has ignited a rally in gold, as investors weigh the benefits of owning the yellow metal versus U.S. Treasuries and the dollar.

Gold hit two historic milestones in 2008. First, in early March, the “yellow metal” hit its all-time high of $1,030 an ounce. Just three months later, the price of gold for December delivery had plummeted to $681 an ounce, a 21-month low and 33.9% drop from its record high. Most gold bugs were equal parts puzzled and broken-hearted.

Gold hovered around $755 from the far East to the New York open on Friday, but then it was off to the races with a vengeance, rocketing nearly straight up from the beginning to end of the Comex, puncturing $800 and holding through the Globex to close at $801.60, up a stunning $57.00. For the week, gold added nearly 8%, albeit most of it yesterday.

Gold sat at its high for the day in Hong Kong on Tuesday, but started declining as London opened, and fell gently through the day, bottoming in the late morning before reclaiming a little lost ground late to finish at $731.40, down $13.70. Overnight, gold has been flat.

Gold declined throughout the Far East and Europe in early Thursday morning trading. The decline rate accelerated about two hours before the Comex open in New York. Once the NY boys showed up, the price dropped another $8 to a low of $856.50 in just a few minutes.

Gold had another lackluster day, slumping to $865 just after New York opened, then making its way higher in fits and starts, finishing just into positive territory at $878.00/oz., up 60 cents. Overnight, gold has fallen off.

Gold prices have skidded about 15% since the “yellow metal” hit an all-time record of $1,032 an ounce on St. Patrick’s Day.

More than 700% in less than three years… our readers have made quite a return… Shares of Seabridge Gold (SA) have soared 700% since I recommended it to subscribers of my Sjuggerud Confidential newsletter. That sounds pretty darn good… until you learn that we were up over 1,300% at their peak.

The gold bugs must be scratching their heads. After all, it’s just not supposed to work this way.

I have had a lot of inquiries this week about silver. What’s gone wrong? What’s next? When silver was trading at $13 an ounce late last year, I said we’d see $22-25 by the Spring. We got to $21. Not a bad call. I was hoping for higher. But how typical of silver to frustrate.