Wet Fuse - Big Bang On Hold

It's nice to get away...and not miss much.

So much for the fireworks in the Precious Metals pits on the 4th of July. The ECB raises rates 25 basis points to 4.25% for the Euro vs a pithy 2% for the Dollar. And of course, since Mr [Tricky] Trichet's "words" following the ECB rate increase did not include adjectives like "vigilant" or "steadfast", the geniuses that infest the Forex markets deemed it absolutely unlikely the ECB will ever raise interest rates again and chose to throw their support behind the Dollar, despite its 225 point rate disadvantage to the Euro. Brilliant!

A classic example of the "buy the rumor, sell the news" event. Only those living under rocks did not know that the ECB would raise interest rates last Thursday by 25 basis points. Traders bid up the Euro, sold the Dollar and bought Gold all in an effort to price into the market just such an event. When the "news" finally broke, and the ECB offered no "hints" about future rate increases, traders booked some tidy profits on their positions ahead of a long weekend in the US.

But! Profits should have been allowed to run... Economic news out of the US following the ECB rate increase was absolutely and unequivocally bad for the Dollar's fortunes. As a matter of fact, had this economic news come out on any other day but Thursday, the Dollar would have been CRUSHED! How and why ANYBODY would buy the US Dollar or cover a Dollar short position on the employment news that came out Thursday morning is beyond dumbfounding. Couple the June loss of 62,000 with an additional loss of 52,000 added to those already lost in April and May, throw in a rise in weekly unemployment claims, toss in a contracting ISM non-manufacturing number, and you get a toxic stew that should have taken the Dollar's breath away. Strangely it didn't. Ah-ha! It will soon enough. Count on it.

US June payrolls fall 62,000; unemployment rate steady at 5.5 pct
WASHINGTON (Thomson Financial) - The US economy shed jobs for the sixth consecutive month in June, but the unemployment rate managed to hold steady as economists expected, the Labor Department said today.

The economy lost 62,000 jobs in June, just a bit more than the 60,000 lost jobs economists polled by Thomson Reuters IFR Markets were expecting.

The economy has lost 438,000 jobs in the first half of this year, and June was the first time since May 2002 that the economy lost jobs for six straight months.

Labor also downwardly revised April and May payrolls by 52,000, for a cumulative two-month total of 129,000 jobs lost.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=027e7429-cd86-45e6-84d7-8d0e84ba0c39

US weekly jobless claims rise 16,000 to 404,000, highest level since March
WASHINGTON (Thomson Financial) - The number of individuals filing new claims for unemployment insurance hit a three-month high last week, while a moving average of the number of people continuing to receive unemployment insurance rose to a level not seen in more than four years, the Labor Department said Thursday.

The number of first-time claims filed in the week ending June 28 rose 16,000 to 404,000, well above the 385,000 claims economists polled by Thomson Reuters IFR Markets were expecting. That is the second time this year initial claims have exceeded 400,000 -- the last time was in late March, when weekly claims rose to 406,000.

The four-week moving average for initial claims also rose sharply, by 11,250 to 390,500, which is the highest level seen since October 2005. Economists prefer the four-week moving average because it smoothes out fluctuations in weekly data.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=87803f6f-6ebe-41e4-995b-58a6c014958d

June ISM non-manufacturing index falls to 48.2 vs 51.0 expected
WASHINGTON (Thomson Financial) - The key survey showed that the US service sector contracted in June after two months of expansion, while a key component of that survey -- business activity -- also contracted, the Institute for Supply Management (ISM) said today.

The group's non-manufacturing index (NMI) for June fell to 48.2, lower than the 51.0 median expectation of economists polled by Thomson Reuters IFR Markets, and down from the 51.7 reading in May. A reading above 50 indicates growth, below 50 contraction.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=da520f2a-01a3-40b3-903f-f5390b1b9f73


The three headlines above speak volumes about the future of the US Dollar. BLEAK! There is NOTHING offered in these economic data releases that even remotely offer any hope of "growth" in the the US Economy as we head into the second half of 2008. Since the year began, the Fed, the Treasury, and the White House have ALL continually "talked up" the return of "growth" in the "second half" of the year. Good luck finding any fellas. Bumbling Ben has led the US Dollar, and the US Economy over a cliff. All that's left is the fall. Reminds me of the Wile E. Coyote as he chases the Roadrunner. Suddenly he finds himself hanging in mid-air, canyon down below, and then, WHOOSH!, down he goes into the bottom of the canyon... a thud... and puff of smoke. Pfft! I laugh every time, and I'm laughing this time. Inflation isn't going to moderate in the second half, it is going to accelerate...globally.

As funny as it is, NOBODY wants the Dollar to crash and burn. Everybody knows it's days are numbered, but it is in nobody's best interest to have the Dollar go into a free fall. That is why these seemingly "irrational" bids continually appear for no apparent reason to put a drag on the Dollars inevitable descent into oblivion. The only buyers of the Dollar these days are the Dollar shorts taking profits and quite possibly the western central banks. The Dollar IS going down, of that have no doubt. It is ridiculous to suggest otherwise. There is not a single fundamental reason to back the Dollar, or buy it. There are plenty of "psychological" reasons to defer the Dollar's demise, but not a single fundamental reason to own it. The headlines above are all the proof you need that the Fed cannot/will not be able to raise interest rates in an effort to "save the Dollar".

Gold and Silver tested the tops of their near four month trading ranges this past week. Gold reaching 946 and Silver 18.44. Gold has traded in a broad range between 860 and 950 since it's recent March high of 1032. Silver has also traded in a broad range between 16.25 and 18.50 since its recent March high of 21.34.

Gold has support at 920 / 910 / 900.

Silver has support at 17.70 / 17.48 / 17.23.

It is only a matter of when these these trading ranges will be broken to the upside, not if they will be broken. It's only a matter of time. Both will break higher in the month of July. Both will retest their respective breakouts in August. And both will achieve new highs shortly after Labor Day. Traders have been offered the opportunity to make a killing over the past four months. Investors have been stuck on the sidelines watching in frustration as there hopes for ever higher Gold and Silver prices are continually dashed. Investors, your patience is soon to be well rewarded. You may even be shocked at what you will witness in the "second half", as the only growth anybody is going to see in the second half is rising inflation and rising Precious Metals prices.


Dow in Secular Bear Market When Priced in Ounces of Gold
With Wednesday's close of the Dow Jones Industrial Average [DJIA] at 11,215.52, the Dow is now officially in a "bear market" when defined as down 20% or more on a closing basis. The Dow is also now lower than its 11,750 peak in 1999!

When measured in ounces of Gold, the Dow has been in a secular bear market since peaking in late 1999.
http://seekingalpha.com/article/83702-dow-in-secular-bear-market-when-priced-in-ounces-of-gold


Something Big is Going On
The following statement is written by Congressman Ron Paul about the pending financial disaster. He will introduce this statement as a special order and insert it into the Congressional Record next week. Fortunately, we have the opportunity to debut it first on the Campaign for Liberty blog. It reads as follows:

I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days—growing more frequent all the time—when I’m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.
http://www.campaignforliberty.com/blog/?p=115


Scorched Earth Economy
In a fiat monetary system the only tangible barriers to money creation are provided by a loss in stakeholder confidence. While the average American is, sad to say, almost completely ignorant of what a fiat monetary system is, let alone the consequences of same, the same cannot be said of the foreign holders of an unprecedented $6 to $7 trillion dollars.

To be a touch more specific, by unprecedented I mean as in “never happened before”. While, under other circumstances this fact might evoke a raised eyebrow or a concerned comment over cocktails… going into the jaws of a vicious economic/dollar crisis those foreign dollar holdings become akin to playing toss with a lit stick of dynamite. He who holds the dollars when the fuse meets the powder are in for a very, very bad day.

As a result, the foreign holders are watching the moves of the Fed very closely. Trying to avoid that scrutiny the Fed, like a curbside three card Monty dealer, has come up with some clever sleights of hand, including lending directly to investment banks and swapping Treasury bills for toxic paper. But that has accomplished little more than buying some time; it does nothing to resolve the “rock and a hard place” dilemma.

Which remains as thus: if the Fed raises rates to prevent a sell off in dollars, they’ll crush the highly indebted and already struggling populace and, in so doing, unleash a serious economic crisis. But if the Fed keeps rates where they are, or even lowers them, they’ll trigger a dollar sell-off and unleash a serious economic crisis.

Either way, the story ends the same: a serious economic crisis.
http://news.goldseek.com/DougCasey/1215100800.php


USDollar on Edge, Gold on Verge
By Jim Willie CB
Imagine hurricane preparations devised by town officials, with nobody changing daily activity and habits. For two decades, the public has subsidized corrupt, crooked, conniving Wall Street elitists without a peep of objection. The problem is that the public citizenry in the Untied States is profoundly ignorant, based upon lack of reliable information and lack of ability to discern much beyond video games and reality television shows and new hamburger options and Hollywood star drug habits. The majority is clueless, while the enlightened few feel helpless to contend with a corrupted system that controls the media networks, regulatory bodies, and law enforcement. Lawsuits against JPMorgan have all failed. Challenges against the USTreasury on gold management have all failed, yet are ongoing. Challenges against the commodity exchanges on oversized short position concentration have all failed. Meanwhile, most Wall Street information shared publicly is patently untrue, self-serving, and acts as part of their corporate brokerage trading strategies. In order to act defensively in defiance, one must invest in gold and silver, or else buy into an energy firm.

Last week the US Federal Reserve blinked. This week they are hiding. They have no policy options left. They are backed into a corner. They can defend the USDollar and further kill both housing and credit starved commerce, or they can bow to the stock market with further stimulus to the USEconomy and invite additional grand increases to cost structures again. The USFed has suffered some rather substantial damage to its private portfolios. This is unprecedented. They are not an altruistic organization, but rather the most parasitic exploitative financial organization ever to operate on US soil, outside organized crime. Heck, they are Ruling Elite organized crime in league with the USGovt! That is just another description of my oft-quoted theme of the Fascist Business Model in full force since year 2000. That is the legacy of the current administration.
http://www.kitco.com/ind/willie/jul022008.html


Urgent Alert: Why Gold Will Jump $200 in One Day
Right now, we have an extreme situation in the commodities market… one you can use to make a lot of money in gold. It all comes down to the gold/oil ratio.
Because gold and oil respond similarly to inflationary pressures, the two tend to trade in a predictable range.

Over the past 25 years, one ounce of gold has bought, on average, 15 barrels of oil. When an ounce of gold can buy 20 barrels of oil, it's expensive and due for a fall. When an ounce of gold can buy less than eight barrels of oil, it's cheap and due for a rise.

Right now, gold buys you just 6.5 barrels of oil – less than half its traditional purchasing power. The tremendous rise in crude oil prices is the cause of this situation. Crude has gained 155% in the last 18 months. Gold has gained "just" 50% in the same time. As you can see from the chart below, this disparity has left the rubber band pulled extremely tight.
http://www.kitco.com/ind/B_Hunt/jul022008.html