Uncertainty = Volatility

What a wild and crazy day in the Precious Metals and Forex Markets. At 5AM news hit the markets that Eurozone inflation had hit a 16 year high. Dollar Bulls promptly ran for the exits as the Euro exploded higher in anticipation of interest rate hikes by the ECB. Gold Bears fought for the exits with the Dollar Bulls as Gold exploded higher.

News of a fire in the North Sea that could shut production of up to 150,000 barrels per day of Oil sent crude to a new record high of $139.89, and sent Gold bears into a panic. A short squeeze in Gold ensued, and Gold quickly climbed over $20 by the time the NY COMEX opened.

It should come as no shock then that Gold prices peaked for the day shortly after the NY COMEX opened as the crooks that reside there were able to once again derail a powerful move in the Gold Market with their wall of paper short contracts. Gold closed almost $11 off it's early morning highs, and Silver closed almost .30 off it's highs of the day.

The Dollar remained weak all day because of strength in the Euro. Oil gave up all it's gains, and was probably also a factor in Gold and Silver's drift from their morning highs. Despite the Precious Metals lackluster close, they were both up boldly today nonetheless. And some light may have been shed on the markets psychology at this juncture.

Gold Bears may not be as strong as we may be lead to believe. The way they panicked out of the market this morning on weakness in the Dollar and strength in Oil was quite revealing. The Gold Bulls showed little strength themselves as they failed to pressure the shorts and squeeze the life out of them while they were on the run. Both camps lack conviction for their respective causes at this time and the extreme volatility we have been witnessing of late is the direct result of this "lack of conviction". It's easy to pin Gold's failure this morning on the crooks at the NY COMEX, but perhaps it had more to do with the short cover buying running out of volume, and no real buyers stepping up to the plate to sustain the move higher this morning.

Much the same could be said about the Dollar Bulls as they ran for the hills this morning, and the Dollar Bears refused to chase after them. These reactions and their consequent volatility are all because of the uncertainty in the markets at this time regarding the Fed and interest rates. In the end this uncertainty will be resolved by the simplest of truths: Inflation is here to stay, the Fed is powerless to stop it, and Gold is the single best defense against it.



Questioning the Fed's Rhetoric...
The markets are all "jacked up" on the Fed's rhetoric about "fighting inflation"... Which the markets take as interest rate hikes... But when? Next year? Oh, so you should give up the positive rate differential that the euro, Norway, Sweden, U.K., Australia, Brazil and others have vs. the dollar because the Fed MIGHT raise rates in the next year? Shame on you all you pundits out there telling people these things about rate hikes in the U.S.!

Listen to me now, and hear me later... THE FED ISN'T GOING TO RAISE RATES! The ECB IS, but the Fed ISN'T! At least not for sometime, IT ISN'T GOING TO RAISE RATES! Did you hear me? Oh, just in case you were busy listening to someone on CNBC tell you that everything is beautiful, I said... THE FED ISN'T GOING TO RAISE RATES!

Over at CitFX, the researchers there put together a great commentary yesterday that our old colleague and corporate FX guru Ashish sent along to me... The researchers at CitiFX think this whole "interest rates are going higher in the U.S." is a crock... They point out that the PCE (personal consumption expenditures) that is supposedly a fave indicator of inflation of the Fed's was 2% last July before the subprime meltdown... It now sits "drastically higher?????" at 2.1%... So, where's the emphasis to hike rates here?

They also point out that "we are looking at the only 3 severe economic downturns of the last 30 years and possibly the 4th now. The prior 3 were all jump started by a corrosive asset price fall (housing in 1979-1981 and 1989-1991 and equities in 2000-2002). In all 3 instances they were all preceded by an oil price surge, which exacerbated the drag on the economy... And all 3 say massive easing cycles from the Fed lasting 18 months, 39 months, and 29 months respectively (average 28 months)."

They other thing they point out is that when unemployment rises, the PCE falls...
-Chuck Butler, The Daily Pfennig


Saudis May Be Strapped for Oil, Close to Full Capacity
Saudi Arabia's pledge to boost oil production by 500,000 barrels per day may not be achievable, a source close to the Saudi oil industry told CNBC.com.

...the country's ability to produce more than 9.45 million barrels a day of easily refined sweet crude is reliant on the newly-discovered Khursaniyah field, which is of yet not producing to its full capacity, a source close to the industry said.

The field was expected to start pumping oil in 2007, but only started producing in 2008 because of technical delays. And even then, it was expected to produce 500,000 barrels per day, but is currently producing just 300,000 barrels per day.

The plan is that Khursaniyah can raise its production by 200,000 barrels, but that would be the maximum, according to Saudi Aramco's annual report.
http://biz.yahoo.com/cnbc/080616/25179997.html

Regardless of any increase in Saudi production, supply worldwide will continue to find difficulty meeting demand. Any increased Saudi Oil production will merely compensate for the 350,000 barrels of production lost per day from Nigeria over the past year. News of Saudi Oil production increases look good in the headlines, but are most unlikely to dent prices much.


A Hidden Silver Default?
By: Theodore Butler

What makes this so bullish for silver is that there is only one good reason for anyone to naked short sell SLV shares - because the available silver needed to be purchased and put into the custodian’s vault doesn’t exist. Rather than go out and aggressively bid up the price of world silver, it is infinitely easier just to sell shares of SLV short. No one would be the wiser and it keeps the price nice and orderly. But this also confirms that real silver may be unavailable in wholesale quantities. In other words, this would be proof of a wholesale shortage of silver to go along with a retail shortage.
http://news.silverseek.com/TedButler/1213640342.php


It is strange sometimes how we find things when we were looking for something else. I came across this video on youtube that just may be the most alarming 10 minutes of video I have ever seen. Every American should see this before his country vanishes. Folks, the Matrix is real, and it's coming to the real world sooner than we could ever imagine:

NORTH AMERICAN UNION & VCHIP TRUTH
http://www.youtube.com/watch?v=vuBo4E77ZXo&feature=related

Just what is really going on behind the curtain...?