Once again we’re faced with a market that doesn’t want to go up, but doesn’t want to go down either.

Since last Wednesday’s high on the NASDAQ — which I said was the closing bookend on the NASDAQ’s spring rally — the markets have all been in consolidation. Yes, the narrow Dow Jones Industrial Average and the specialized Russell 2000 made new highs — barely — on Friday. But since then even they’ve been in retreat.

So what else is new? The market has done precisely what it has had to do to make the maximum number of investors wrong.

The debate has all been about whether the big bull move from early April would be vigorously extended, or if a vicious correction would set in (as I’ve been saying). Of course the answer had to be “none of the above.” It always is, after all. There have been thrills, spills and chills, but in essence the market has just sat there all week.

But don’t get used to it. Because that’s just another way the market is going to fool you. This won’t last. Markets need reasons to go up. And when they don’t get them, they go down. That’s still what I’m expecting for this bear market rally.

I’ve been saying here for months that the best reason of all for the market to go up would be a fundamental change in monetary policy — and in the procedures for implementing that policy — by the Federal Reserve. And I’ve said that the best indicator that these changes are happening will be a rally in the price of gold — just like we got in August of 1982, the last time the Fed pulled the economy out of a deflationary spiral. When we see gold rally again, we can be sure that today’s deflationary spiral is ending, and that the Fed is finally providing the parched economy with the monetary liquidity it needs.

I’ve pointed out several times here that gold has been in a mild uptrend since the end of March, bottoming several days before the NASDAQ’s April 4 lows. Now yesterday we got a powerful breakout in gold, and in most gold mining stocks. But is it the signal I’ve been waiting for? Sadly, it’s too soon to tell. Right now it looks like it may be nothing more than a technical effect. My thanks go to MetaMarkets.com community member Ed Rombach for pointing out the true story in a post yesterday.

Yesterday it was revealed that Centaur Mining and Exploration Ltd., a Australian gold producer, had filed for bankruptcy protection with a huge short position in gold on its books. There were rumors in the gold markets that Centaur has hedged as much as five times its assets. That’s a hedge? Hardly.

But call it what you will. Either way, if you’re a creditor of the bankrupt Centaur you are implicitly short a lot of gold. That’s because if gold goes down, Centaur’s big “hedge” will pay off and there will be lots of money for all the creditors. But if gold goes up, Centaur’s assets get wiped out by trading losses and the creditors end up with nothing. The only thing for the creditors to do is to protect themselves by buying gold. And apparently that’s what they did yesterday — in size. And of course other gold market participants (being the friendly, altruistic sort) held out a helping hand to Centaur’s creditors by front-running the living daylights out of them. It’s called a short squeeze.

The last time something like this happened was in September 1999, when a similar short-squeeze involving the South African mine Ashanti sent gold from 255 to 340 in just two weeks.

So maybe that’s all this move in gold really is. We’ll find out more next Tuesday when the Bank of England is scheduled to put 20 tons up for sale at auction.

But maybe, just maybe, this is the catalyst I’ve been looking for. The great economist Joseph Schumpeter said, “The modern mind dislikes gold because it blurts out unpleasant truths.” I’m just hoping that this time the truth will set us free.