Wednesday, June 20, 2007

Bang Your Head

The dead cat bounce in the US Treasury makets may have reached it's apogee. Falling treasuries again set sail to the Dollar and this in turn crosschecked the Precious Metals. Oil's retracement looks brief, trading at 68.82 as I type this. Despite this "triple threat" of negativity, Gold and Silver held up remarkably well comparison to the last bungee jump in the treasury markets. Had Oil not retreated on these suspect inventory numbers, I believe Gold and Silver would have been much firmer. Investment demand is growing by the day...along with the realization that rising interest rates are Gold Positive in the long run.

Unprecedented dishoarding by central banks fails to push gold down

Dear Friend of GATA and Gold:

Neal Ryan's daily gold market note for the Blanchard Economic Research Unit today added up the desperation of the world's central banks to prop up the U.S. dollar system by rigging markets. Ryan finds central bank gold sales of more than 240 tonnes in just the last four months, dishoarding at an unprecedented rate. "Seeing the gold price hold above the $640 level during this period of increased sales should be the best demonstration of just how robust the physical demand side of the market is at present," Ryan writes.

Oil, Gas Futures Fall After Government Reports Jump in Inventories of Both

The EIA report was bearish for the energy market for several reasons, Evans explained. First, with oil inventories at a level not seen since May 1998, there is a glut of crude on the market. Second, despite the fact that refineries were processing less crude last week, gasoline inventories rose. That suggests that refiners are doing just fine with less capacity, and are getting more gasoline out of each barrel of oil, Evans said.

Yeah, right... If you read the entire EIA report here:

It is interesting to note that with an increase in imports and a decline in refinery inputs Crude inventories rose. A decline in refinery inputs means that refinery capacity fell AGAIN last week. And since the capacity to refine oil is lower, more of it "sits" in inventory. Gasoline inventories rose in spite of reduced refining capacity...well that's because we imported 127k more barrels of gasoline each day last week...not because refiners are doing just fine with less capacity, and are getting more gasoline out of each barrel of oil as this clown above, Mr. Evans would have you believe.

Stocks Plummet on Soaring Bond Yields

Larry Peruzzi, senior equity trader at The Boston Company Asset Management, noted that while high yields are worrisome, the yield curve is more normal now, which should be positive for stocks going forward.

The yield curve is the difference between short-term yields and long-term yields; the rise in long-term bond yields has made the relationship more typical, rewarding long-term risk with higher returns. The pattern now suggests "steady growth -- not spectacular, but somewhat steady," said Peruzzi. Before, the yield curve had pointed to a slowdown in growth.

Larry, Stocks do NOT like rising long-term yields, period. [But Gold does.] I hate to say it Larry, but I think "the pattern" now suggests that the rest of the world can't get far enough away, fast enough, from The US Debt Bomb.

Troubles at two of Bear Stearns Cos.' hedge funds also weighed on the markets, especially financial firms: Bear Stearns, JPMorgan Chase & Co. and Merrill Lynch & Co. all fell more than 2 percent.

Subprime sector hit by $1bn assets sale

The giant market for securities backed by US subprime mortgages was thrown into turmoil on Wednesday as lenders struggled to sell more than $1bn of assets seized from two Bear Stearns hedge funds that suffered heavy losse on subprime bets.

This is only the tip of that iceberg folks...

Rate Rise Pushes Housing, Economy to `Blood Bath'

June 20 (Bloomberg) -- The worst is yet to come for the U.S. housing market.

``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''

Have you been buying Gold at these "Sale Of The Century" prices?

Alas, it is still to early to call June 8th an interim bottom in Gold and Silver. Should Oil quickly regain it's mojo, and the Stock Market slide from this potential double top accelerate, Gold may soon realize that rising interest rates are in it's favor. However, we cannot discount the Dollars influence over Gold. Continuing "noise" in the Dollar will be disruptive to the Precious Metals, but not detrimental. Trading opportunities will persist going forward as Gold and Silver should continue "drifting" higher on balance. Remember, Gold is the barometer of inflation. Central bankers will do almost anything, and everything, to keep Gold from exposing their lies.

Silver Resistance: 13.26 / 13.33 / 13.39

Silver Support: 13.16 / 13.05 / 12.95
________________________________All prices SPOT

Gold Resistance: 658 / 662 / 666

Gold Support: 655 / 652 / 649

Gold/Silver Ratio at 49.82 [target <49]

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