Thursday, June 28, 2007

Stick A Fork In The Dollar

Oil Futures Settle Below $70 a Barrel After Rising As High As $70.52 on Supply Concerns

Federal Reserve Holds Interest Rates Steady; Policymakers See Improvements on Inflation
WASHINGTON (AP) -- The Federal Reserve held interest rates steady Thursday, extending a yearlong breather for borrowers. Although policymakers observed improvements on inflation, they made clear they were not ready to declare victory on that front.

US Q1 GDP growth revised up to 0.7 pct, core PCE price index up 2.4 pct
WASHINGTON (Thomson Financial) - The US economy grew slightly faster in the first quarter than last reported, but inflation was also higher, according to Commerce Department revisions.

The Federal Reserve "policymakers" [aka: boobs] observed improvements on inflation. While on the other side of town the Commerce Department "statisticians" tell us that inflation is higher. Who should we believe? GOLD! Why Gold? Because Gold is the Truthsayer. In spite of everything the PPT and dem Rat Bastids have thrown at Gold, Gold is $65.30 higher today than it was one year ago as I type this... +11.2%. Core inflation is fiction!

'Sub-prime Chernobyl'
Nouriel Roubini, economics professor at New York University, said there were now concerns about "systemic risk fallout" from the Bear Stearns debacle as investors look more closely at the real value of CDOs.

"These highly illiquid securities have been priced so far on unrealistic and distorted credit ratings as the ratings industry has been complicit," he said.

"They have not been rerated in a way that is consistent with rising subprime default rates," he said. "That is why Wall Street is in a panic. Losses will be massive once these assets are correctly priced to market."

Lombard Street said the Bear Stearns fiasco was the tip of the iceberg. The greatest risk lies in the "toxic tranches" of lower-grade securities held by the banks.

Much-trumpeted claims that banks had shifted off the riskiest credit exposure on to the asset markets was "largely a fiction," said Mr Dumas.

The worst of the US property crisis has yet to hit since there is an overhang of $2,000 billion of mortgages with adjustable rates that have yet to be reset. Many borrowers could see payments jump by half, or even double.

Gold made a surprisingly quick move to 648 today. Efforts to sustain a move higher ran out of gas. A revisit to 645 before we move higher should not be unexpected. Silver ran into a wall at 12.48. Resistance at 12.46 was expected as Silver worked it's way back to it's 65 week moving average. Both have laid the foundations to their respective bases today. This base building could persist through The 4th Of July.

All technical analysis aside...the fate of the Precious Metals rests with the US Dollar. (please see chart above) It always has, and will continue to, as these metals grind ever higher. Technically however, the Dollar appears to be approaching a crossroads as it's Bear Market mini-rally runs out of gas. Absent the weak handed bears in the Dollar, nobody would want this generic toilet paper...most folks would probably opt to use their bare hand... Should the Dollar lose support at 82.02, a commodity rally could ignite swiftly, carrying the Precious Metals higher. Further decay in T-bond prices and a swamping of Wall Street may also result.

Folks should be selling their Dollars to "avoid risk", not their Gold.

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