Tuesday, July 24, 2007

Yen Kicks Dollar To Curb

On July 16th ...And The Sh*t Hits The Fan I mentioned the demands made by Iran that Japan begin paying for all the Oil they purchase from Iran ONLY in Yen. And I quote: "This is certainly BAD news for the good 'ol greenback, and potentially even worse news for the "Yen carry trade". Keep an eye on this. It should be noted that despite what you hear in the press, funds obtained in the "Yen carry trade" are NOT used to purchase Gold. That would be ridiculous. They are primarily used to purchase higher yielding securities. Can you say "mortgage backed securities"? This demand of Japan by Iran could be the spark that burns that house down. This story should be followed." The Yen has been on a rampage since.

The "Yen carry-trade" has propped up the Dollar for months. It appears the last crutch under the feeble Dollar has been snatched. I'd have expected Gold and Silver to be reaching the upper atmosphere as a result of today's action in the Dollar. Strangely, though in these rigged markets not unexpectedly, they weakened. It would be difficult to blame the drop in Oil prices for the weakness in metals today, but I'm certain it will be used as an excuse by many. Gold and Silver were attacked at the open on their overnight strength again today. The fact that the pressure was able to contain the metals as the Dollar continued to plummet was a bit dismaying. As the metal weakened traders in gold Stocks began to toss their babies out with the bath water as the Stock Market Indexes accelerated lower. I suspect they will soon regret this.

Now, as I was saying... The yen has been used to prop up the Dollar for the past 2 1/2 years. In January 2005 the Yen was crushed to rally the Dollar for the entire year. That 2005 Bear market Rally in the Dollar got way long in the tooth and and was capped as the Yen reached near 82 on it's Index. The Yen rallied for the first half of 2006 as the Dollar tanked and the Precious metals soared. The Yen also rallied from a low of 82 in late January that coincided with Gold's Spring run up near $700. Could a Yen rally launching now, lead to new highs in Gold and Silver over the next 6-9 months? And new lows for the Dollar? Stay tuned...

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