Friday, June 30, 2006


Gold Soars On Dovish Fed

The reports on golds break-out Friday. "Gold and other metals were sharply higher Friday amid a dollar selloff after the Federal Reserve gave a benign outlook about future hikes in interest rates. Gold for August delivery surged above the $600 mark, and was recently gaining $23.60, or 4%, to $612.50. Among other metals, silver for July delivery was adding 59 cents, or 5.7%, to $11.01 an ounce."

"The metals market, which was closed Thursday by the time the Fed delivered a quarter-point rate hike and made conditional comments about future policy, rallied overseas and at the opening of trading Friday."

"Commodities have sold off over the past month and a half amid worries that the Fed might lift interest rates too much, hurting a U.S. economy that is already showing signs of slowing. This, commodities bulls feared, would curb global growth and demand for raw materials. The dollar had also began rallying since mid-May on the prospect of further rate hikes."

"But the dollar plunged following the Fed's comments, and it continued to slide on Friday. The Dollar Index, which tracks the value of the dollar against a basket of key currencies, was recently down 0.7%."

"A report on personal income showing that the Fed's favorite inflation indicator, the personal consumption expenditures index, rose 4.1% in May failed to revive the dollar. In addition, a survey showing weakness in manufacturing activity in the Chicago economy in June reinforced expectations of a declining trend."

"Gold and metals had already began showing signs of recovery earlier this week. According to Michael Jalonen, metals analyst with Merrill Lynch, gold made a bottom when it closed at $560 on June 14, representing a 23% drop from its May highs. Since then, gold has benefited from safe-haven bids amid rising crude oil prices and tensions between the U.S. and Iran over Tehran's nuclear program."

"'If this is the case and the Fed does pause in raising U.S. interest rates, this would be a favorable development for bullion,' writes Jalonen. 'Given the plethora of favorable factors impacting bullion (Merrill Lynch's forecast for further weakness in the dollar, renewed fabrication demand in the fall and geopolitical tensions, to name a few), we believe bullion should rise back to the $650/oz level by early fall.'"

To be updated later today if additional news breaks.

Of course, gold also soaring before a long weekend with a Middle East meltdown in progress...
Uh oh, that's not good John.
Ben, care to elaborate? I'd like to hear your take...
Well, it has always been a given for the treasury to talk-up a strong US$. If this guy is neutral, is there any advocate of a strong currency left? It could be a serious sign, because there are many countries that do the same thing and their economies are basket-cases.
hey ben, can we get kitco gold and silver charts in the margins?

If you guys want. I messed around with the code and it doesn't work very well. The reason I haven't used it is the delay in load time, but I will put it up if you want.
...there are many countries that do the same thing and their economies are basket-cases.

And ours isn't? ;-)

All things considered, the gold boom will be right on schedule (just like the housing bust).
My 2 cents. The FED is done for now, next we get the rate "pause".As to the metals, up we go for now, but the thing I keep in the back of my mind is the fact that the CB's world wide do not like Gold. Yea they store some and yes many countries are adding(insurance), but it goes 100% against what FIAT stands for, so they will pull out all the stops if need be(and it will be) to keep hammering it back down. Will it work forever? No of course not. Will Gold hit a $1000.00? sure and beyond, and like wise silver will hit $50.00 and beyond. These things will happen, the trick/fun is trying to put a date on it, and that my freinds ain't easy. Will the U.S. ever repay it's debt? Not no way, not no how!It /we have no intention of doing so. It WILL be repudiated. All debts public or private must be repaid, I've heard that all my life, and it's true. Unless of course they are not, and you leave someone else holding the bag.For those that think it will be repaid, one question... How? Nasty thing unbacked paper, and the final chapter is always the same. We live in perhaps the most interesting of times and most of us will(I hope) live to see it play out, we'll pick up the pieces and go on. My 2 cents.
"It WILL be repudiated."

that's why I've always disagreed with the hyperinflationary scenario of jim puplava.
The Legend Of Gold has suckered in human speculators for centuries.
that's why I've always disagreed with the hyperinflationary scenario of jim puplava.
# posted by john_law_the_II : 7:39 AM

I used to lean that way, and he makes some vary valid points, but I just don't see how we could mimic Weimer Germany. At any rate it's got a whole lot of us thinking in overtime.Thanks to all of you guys for posting the food for thought, and thanks Mr. Ben for the platform! Have a great 4th folks.We are still one hellava country!
The Legend Of Gold has suckered in human speculators for centuries.
# posted by surfer-x : 10:18 AM

As opposed to in-human speculators?
Here is a link from Robert Reich stating Deflation is the real concern instead of inflation. Not sure I agree. Deflation would not help with all the private and public debt.
It WILL be repudiated.

Of that I've no doubt either.

I just don't see how we could mimic Weimer Germany

Yet such things just seem to happen, don't they? Hasn't Heli-Ben already laid out such a game plan??

Personally, I don't claim to know how the USD will be destroyed, only that it's destruction is inevitable. Knowing how & when would be useful though, now wouldn't it? ;-)

Here's what scares me...

The USofA is the world's sole superpower, possessing the world's most capable military as well as the foremost nuclear capability. Countries, like their economies, are ultimately reflections of the emotional state of the people within them. What's to stop a scared & wounded nation from publicly repudiating all foreign debt, forcibly taking control of strategic resources around the globe, and daring the rest of world to do anything about it? Does anyone ever allow their standard of living to decline without a fight?
I'm in the hyperinflationary camp with Jim Puplava and he discusses the deflationary/hyperinflationary battle all the time. His contention is hyperinflation first with deflation as the end game. I agree...first you need to protect your wealth. All the major currencies around the world are inflating
here is why I don't think hyperinflation can happen. the Federal Reserve and the banks are basically one in the same in our fractional reserve system. why would the Federal Reserve inflate away their power to create hundreds or billions of dollars out of nothing? why would the banks let that happen

who would be printing the money?
Fractional reserve lending works both ways... put in $1, lend out $10; take out $1, call in $10. Most banks simply could not survive a deflationary spiral, so the Fed will do everything to prevent it. Still just "pushing on a string", IMHO.

You've seen Mogambo's rant on bank reserves; their leverage is immense and historically unmatched. Combine that with record exposure to RE/MBS and hyperinflation seems all but assured.
and what will cause that hyperinflation? deflation. most financial assets like stocks, bonds and real estate will(and I think right now are) deflate. this will trigger a response in the world that is to print money. I lead towards a deflation and then an inflationary answer, like the depression. financial assets collapsed and then the New Deal launched inflation during the Great Depression.

Ben put up a weekend thread for mid-year predictions on HBB. Well, once YOY comparisons go decidedly negative, the media will lead a huge sea change in public perception of RE. The big public homebuilders will have no choice but to cut prices drastically to lure anyone into buying. Shazam! Instant, nationwide deflation, since (like 80's Japan) everything is tied into the value of RE.
"everything is tied into the value of RE"

Is the housing bubble enough to take care of our massive twin deficits?

"financial assets collapsed and then the New Deal launched inflation during the Great Depression"

History doesn't repeat, but it sure does rhyme. Will our leaders have the country fall into anther deflationary depressions again? You have to take the previous example and factor in what's different and how we will react this time to get the outcome.
(Will our leaders have the country fall into anther deflationary depressions again?)

they can't magically hold up asset values. they don't really have much say. they didn't have much say in the NASDAQ falling apart. same with housing. the only thing they can do is react to events that happened.
Break out the tinfoil hats.

All joking aside, are there any posters in here who put stock in this bunk? It gives me pause when I see sites like safehaven linking things like this side-by-side with technical analyses. I wonder how many PM bulls out there think the black helicopters are circling their house as we speak? Anyways as I mentioned in another thread, there won't be a "North American Union" or an AMERO, at least not in our lifetimes. So I get a special chuckle out of someone promising that it'll happen by the end of this year.
I doubt they use helicopters, but apparently they use technology to track phone calls and financial transactions. We certainly don't know the scope. I hope no one is too concerned. I am sure the folks who have the access have the utmost sense of honor, and would never look to see what their ex-lover/spouse, neighbor, whatever is doing...just out of curiosity of course. Black helicopters? No one has admitted to that yet, but I don't see why they would need them, so personally I doubt it. Does that answer your question?
Although we do seem to be surrendering our freedom & liberty on a daily basis -- the founding fathers wouldn't recognize their country -- I can't put much stock in these things either. Ultimately the people get what they want... or can be persuaded into believing that they want.

There's also the problems associated with controlling a relatively well-armed populace, among which the "tin-foiled hat" crowd are probably the best equipped. ;-)

That said, look at my "debt repudiation" scenario above. Who's to say the US wouldn't outright take over the US & Mexico in order to secure the resources therein? Would a new "Greater Depression" (combined with an Al Qaida nuke or two) scare the country into such action?

Debating where the boundaries lie and what the administration's true intentions for the programs you mentioned might be interesting, but its not germane to the article I posted. My question pertains to soley to the conspiracy theory that some super-secret plan to annex (or merge with?) Canada and Mexico exists and according to some will be carried out by year's end. So far all the articles I skimmed seem to pin this on some bureaucrat speculating such a thing could exist, the fact that an interstate is being built somewhere, or most ridiculously, that the National Guard is being trained in urban combat ... prior to deploying to an urban combat zone (Iraq).

OTOH, referencing the two programs you did brings up an interesting point. Do you really think that an administration that can't even prevent leaks about some surveillance programs with ostensibly agreeable motivations would be able to keep a plan to create a new continent state and do away with 200+ years of governance without a single leak? Do you think that the vast majority of Americans opposed to amnesty for illegal aliens will just roll over take the whole country in? Its no accident that the amnesty bill died in the house, any congressman up for election this fall with any kind of a challenger is scared to death of appearing to support illegal immigration. I fail to see how in such an environment a "North American Union" could even be up for anything other then the most hypothetical of discussions.
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