In the dawn hours of Wednesday morning as I was riding the elevator to the CNBC studio I glanced blankly at the flashing buttons desperately trying to remember who went bankrupt that Monday. Ah of course, it was Lehman. But that was before AIG and after Freddie and Fannie and a million other market crises in between. The event had happened less than 48 hours ago, but already it seemed like a distant memory. Little did I know however, that turmoil that had preceded would pale comparison with what was just about to follow.

On Thursday, Hank Paulson announced that the US government would create am investment vehicle to take illiquid MBS assets off the books of ailing banks and the just for good measure the SEC banned short selling of 800 financial stocks. Net result? Global stock markets exploded on Friday with Footsie up 8% in one day and while Dow gained 750 points in just two sessions as the mother of all short squeezes pushed price higher. Winning is easy when the game is rigged.

Of course the authorities had no choice. In the inimitable words of Senate Majority Leader Harry Reid, “No one knows what to do.” So they had to do something. As I noted on Friday, “”They are absolutely petrified of a run on financial assets and they came very close to that on Thursday. At this point they have just decided that fiscal responsibility goes out the door and anything and everything that needs to be shored up financially will be done so in order to alleviate the panic.”

So what does this rescue do to the dollar? Friday may have provided a clue to the near term direction. Initially, the greenback rallied on the news, but as the day wore on the euro gained more and more strength until by end of trade Friday it ended on the highs near the 1.4500 figure. Granted the run in oil was a big boost to euro’ s fortunes, but the true catalyst was gold. Despite all of the hoopla regarding the new RTC, gold barely gave ground after gaining more than $100 in less than 48 hours.

The fact that gold remains bid is a sign that investors are losing confidence in the buck. The array of measures announced this week committed the US to nearly $1 Trillion in new government spending - a perfect formula for debasing the currency. Are we becoming the United States of Argentina? Perhaps. Gold may be the key to true market sentiment.

A move towards $1000 will almost certainly push the euro higher, not because the unit is particularly attractive in its own right, but because it is the primary anti-dollar bet in the currency market. If international investors lose their appetite for dollar denominated assets, the greenback will be in trouble irrespective of economic fundamentals elsewhere.

So watch the yellow metal next week. It may forecast dollar’ s fate better than event on the economic calendar.

Boris Schlossberg serves as director of currency research at GFT, and runs bktraderfx.com.