New Gold Dream.

Spot gold rose $5.63 to $913.25 Thursday - a new closing high for the move since the September low.

For those keeping score at home, that means the gold price is now above the price of the SPX (909.92) for the first time since having fallen below it in the summer of 1990.

The last time we saw the dollar price of gold rise above the SPX after a long period of being below it was in summer of 1973, after which the price of gold more than tripled over the next year. The gold price would then remain above the SPX price for 17 years, ending in the summer of 1990.

Will we see something similar this time around? (i.e. Will gold tend to outperform stocks for the next decade or so, as it did after the summer of 1973?)

I suspect that’s going to be the case, given the long-term nature of the big secular bear market in stocks that began back in 2000 in “real” terms, and the big secular bull market in gold that began in 1999.

The CNBC folks may tell you that gold is rallying simply because of “panic,” but this would be far from the truth. The market isn’t that stupid. It doesn’t buy gold to hold it close and sleep with it at night because it’s “scared.” The market buys gold to hedge against debasement of fiat currencies and as a store of value.

In this case, we’re seeing gold sniff out what the result of all the Federal money-printing and backstopping in response to the current collapse will eventually result in: An “inflationary holocaust,” as Jim Rogers put it.

There are consequences for every action taken by governments and central banks when they meddle in the markets; in this case, the consequence will be massive inflation going forward.

It may sound a little counterintuitive, since the Fed is responding to “deflationary” forces resulting from the housing bust and the ensuing credit crunch. But at the end of the day, money printing always results in inflation, just as it did following Greenspan’s printathon in response to the stock bubble bursting back in 2000 (which was also “deflationary” at the time, but didn’t turn out that way due to the Fed’s printing).

Let’s not forget that crude oil was $20 back in 2000 and would rally fourfold (to $80) over the next 7 years, before Gentle Ben began running his presses back in 2007. That set crude on another run to $140 in under a year. If that sounds like a parabola, that’s because it is one.

It took the Fed from its inception in 1913 until 1997 to grow its balance sheet the first $500 billion. It then took another 10 years to grow it an additional $500 billion. In the past 3 weeks, the Fed has now grown its balance sheet another $700 billion in an attempt to force the credit markets to unfreeze by the brute force of massive inflation.

This is a classic description of a parabolic money printing, and it sets the stage for an inflationary tsunami going forward.

Buckle up. It’s going to be a wild ride. We always knew how the Fed would respond to this crisis, because it’s how the Fed always responds to financial problems: More money printing.

And it’s going to have a very predictable result too.