On Monday the U.S. Congress chose not to pass the latest version of the $700 bln bailout proposal. Not surprisingly, the U.S. stock market took it on the chin. The DJIA dropped 777 points, the biggest one-day point drop in history. As I write this, Asian stocks are getting hammered as well.

Gold surged back above the $900 level on strong flight to quality buying. The yellow metal remains comfortably above the major moving averages, with dips toward the 100-day MA providing supportive buying interest. The break of resistance at 915.67 (18-Sep high) bodes well for the anticipated challenge of the 935.30 level. Above that, potential is toward the 988.00 peak from 15-Jul.

Most people are looking to the stock market for an indication of just how bad the financial crisis has become. Stocks are the asset class that people are most familiar with and unfortunately - along with housing - where the vast majority of individual wealth is stored. Neither is faring very well this year.

While equities did in fact provide a pretty fair assessment of just how dire the situation had become on Monday, the global credit markets are really where the current crisis is playing out. The failure to pass the TARP proposal leaves substantial systemic risks highlighted.

Key short-term interest rates surged and spreads widened, clearly indicating that banks remain extremely reluctant to lend amongst themselves. Overnight dollar Libor reached 6.875%, up from 2.569% before the TARP vote. Fears that the credit markets would seize-up entirely, possibly sparking additional bank failures in the U.S. and Europe, prompted central banks to inject massive amounts of additional liquidity into the global financial system.

As the debate in Congress floundered, the Fed announced that it would more than double the size of its dollar swap program to a staggering $620 billion. In addition, the Fed will triple the size of the 84-day TAF auctions from $25 bln to $75 bln. They also plan to conduct two forward auctions totaling $150 bln in Nov to provide year-end funding.

Since this crisis is global in scope, the Fed isn't the only central bank pumping liquidity in the hope that the system doesn't grind to complete halt. The ECB injected ¤120 bln of 38-day funds and the BoE auctioned £40 bln in 3-month loans.

As we await the real bailout, the efforts of the various central banks are further devaluing currencies, including the dollar. Even if the bailout ultimately passes, don't expect any sustained relief for the greenback.

If the dollar resumes its long-term downtrend, we would expect gold to resume its long-term uptrend. Physical gold ownership is the best way to protect against systemic risks and the vulnerable dollar. Gold also provides uncorrelated diversification against falling stock prices. If you are looking to preserve your wealth in these uncertain economic times: Gold is the answer.

Gold is bedrock.