-- Posted 7 June, 2006 | | Source: SilverSeek.com

Note: A varied format of the Gold Seeker Report will be presented this week as Peter Spina assumes reporting privileges. 

Market Recap:

Volatility across the board with another drop today on Wall Street with the DJIA closing under the 11,000 mark. Falling another 71 points, closing at 10,930 on the DJIA, the markets hit the lowest levels in almost 3 months Wednesday with little in the way of economic data or corporate news to reverse the selling pressures despite the drop in energy prices weak. Oil fell over $1.50 on the day closing at $70.82 with natural gas tumbling just over 41 cents to $5.974. Bonds also fell with the 10-year Treasury bond yielding 5.026% around the close of New York.

"Monday and Tuesday, we saw selling, but it wasn't the type of volume we like to see for short term-buying opportunities.... All the sellers aren't out of this market yet."

Markets & Economy:

Oil slid more than two percent on data which showed growing stockpiles, easing some supply worries as the US Summer driving season begins. The U.S. Dollar was higher at the close of New York trading, strengthening against the Euro and Yen and nearly unchanged against the Canadian Dollar.  The US Dollar was supported Wednesday by fresh hawkish Fed comments, although traders are keeping a watchful eye on the ECB which meets tomorrow, ahead of good economic data from the Euro Zone.

Federal Reserve Transparency/Clarity?  NOT enough so according to today’s USA Today report below.  Readers may already be asking how transparent can we expect a private organization - meeting behind closed doors, which dictates monetary policy – to be?

Fed, Bernanke take blistering flak

"Give us a break, please. Can we have just one week, or at least one day, without some Fed official obsessing publicly about containing inflation?" says Ed Yardeni, chief investment strategist at Oak Associates. "They are giving us more information than we need."

The issue goes beyond language, however. There are a number of reasons the Fed is taking flak as it tries to wind up a drive that has pushed short-term interest rates to 5% from a historic low of 1% in mid-2004:

• The economy is changing. Minutes of the March 27-28 meeting of the Fed's policymaking Open Market Committee show members believed the end of the tightening cycle was near, with some expressing concern the Fed could push rates too high. Bernanke's April testimony echoed those comments. The markets, however, interpreted Bernanke's "pause" statement as soft on inflation. Further, in recent weeks core inflation, which doesn't include food and energy, has been running above the Fed's 2% projection.

As the Fed responded to market concerns and altered conditions, its message necessarily changed.”

Greenspan Warns on Oil?  Greenspan came back into headlines, after retiring earlier this year as chairman of the FOMC. If my memory serves me correct, it was Greenspan himself who went in front of cameras last year as oil moved above $50 then $60 a barrel, trying to calm nervous investors about record prices and the impact on the economy.  It was Greenspan who noted that speculators were contributing to driving prices higher and it was Greenspan who inferred oil was overpriced.  Well now that he is no longer at the Federal Reserve and oil prices $10-$20 higher, his remarks on oil appear to be changing per this report.

Greenspan sounds alarm on oil supply  

“Alan Greenspan, the former Federal Reserve chairman, offered a grim view on Wednesday of the world's rising vulnerability to high crude oil prices, saying he was skeptical that oil producers could pump enough crude to meet future demand.

Since the 1940s, U.S. consumers have shown an uncanny ability to shoulder rising energy prices, but consumers' immunity to oil price shocks was running out, Greenspan said.

"The United States, especially, has been able to absorb the huge implicit tax of rising oil prices so far," Greenspan told the Senate Foreign Relations Committee in his first congressional testimony since leaving the U.S. central bank earlier this year. "However, recent data indicate we may finally be experiencing some impact.

…

"The balance of world oil supply and demand has become so precarious that even small acts of sabotage or local insurrection have a significant impact on oil prices," he said, adding that global refining capacity was still too limited"

Housing Forecasts Cut:  Housing, a pivotal component to US economic activity and the ATM machine of the American consumer, continues to show signs of trouble.  The largest housing industry trade group has called rising rates a threat to the speculative marketplace with prices for part of the market “vulnerable.”

Industry Cuts Forecasts for Home Sales

“The trade group, in its monthly forecast, projected sales of existing homes would fall 6.8 percent to 6.6 million this year from the 2005 record of 7.08 million. Sales of new homes are projected to decline 13.4 percent to 1.11 million from a record 1.28 million last year.

The forecast is slightly below the group’s earlier 2006 sales projection of 6.62 million existing homes and 1.13 million new homes.

…

Buyers are currently committing to an average 6.67 percent interest on new, 30-year fixed-rate mortgages, compared with about 5.5 percent a year ago. That change raises the monthly cost $150 for a $200,000 mortgage.”

Pension Plans in RED:  “Big Companies” were a combined $140,000,000,000 (billion) in the red on their pension plans in 2005, an improvement from the $164 Billion in 2004 – “The 500 large firms in the S&P 500 counted $1.32 trillion in pension assets against $1.46 trillion in obligations. The $140 billion gap translated to a 90.4 percent funding ratio, an improvement from 88.5 percent in 2004.” - more

Household Debt Widens:  Who is Financing the American Debt Machine?

“These days – which started in 1999, when net financial investment turned negative – households rely on the rest of the world financing their expenditures.

In the fourth quarter of 2005, this figure was running at a record annual rate of $662 billion, up from 1999's $231 billion. Every indication is that the number continued to grow.

The recently released gross domestic product for the first quarter showed that a similar negative item – expenditures and residential investment minus disposable personal income – grew 16 percent from the fourth quarter.

This is nothing new, you might be thinking, so why worry now?

Think of the game of musical chairs. Now turn the music off.” - More

Market Statistics:

Gold & Silver Statistics:

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

COMEX Gold Trust (IAU)

Silver Trust (SLV)

Gold & Silver Commentary:

Gold and silver also sold-off before staging a strong reversal near the end of New York metals trading nearly erasing all losses and even turning positive in the silver market.  This helped to reverse metal equities too, but as the day progressed and the general markets weakened we continued to see the pattern where the general market selling pressures drag down the metal equities along with it.  This led to a sell-off of nearly 3% (HUI) despite spending the mid-day session in positive territory after early morning losses.

June Gold closed down 2 at 627.4. This was 9.9 up from the low and 0.6 off the high.

July Silver finished up 0.045 at 11.89, 0.04 off the high and 0.46 up from the low.

Considering the magnitude of the early declines in gold, the bull camp has to be given some credit for its ability to bounce, especially with the Dollar holding higher on the day and the outlook for inflation being downgraded. We also think that the gold market was lifted by comments from the "ex" Fed Chairman that seemed to caution the Fed about over tightening. Apparently Ex Chairman Greenspan suggested that the US consumers were being pinched by high fuel costs and some took that as a sign that Greenspan was sending a shot across the bow of the current Fed leadership. It is also possible that the London Anthrax threat served to prompt short covering but in the past the fear of anthrax tended to be bearish toward metals prices. Some longs were reportedly balking at buying gold ahead of the coming ECB rate hike decision on Thursday morning. Another late element discouraging would-be buyers of gold, were suggestions from the Fed's Guynn that the Fed would not get behind the inflation curve.

Despite some temporary selling pressure the silver market managed to avoid a significant technical breakout in the face of overt weakness in gold. With the late bargain hunting buying interest, the silver trade seemed to break its correlation with copper, which been more undermining than supportive of silver recently. It does seem like volume and open interest patterns are starting to shift up in silver and that might be a factor that countervails the pattern of lower lows and lower highs. So far, the market doesn't seem to be concerned about a tightening of exchange stocks and for that reason it is clear that the market is mostly discounting physical supply developments.

-         The Hightower Report, Futures Analysis and Forecasting

My Two Ounces:

Reader feedback, comments, analysis.  My Two Ounces features and encourages participation from our thousands of daily readers.

This week, please use for your contributions: http://www.goldseek.com/contact.php

By: Charleston Voice

“Yesterday we reported to you on the new Gold Mining Index, the "GDX", and its benefits. We also looked at the possibility that using the GDX, HUI, and the GLD, SLV, and the metals themselves, on the likelihood that things may be looking better with a turn-up in the weekly MACD bars and a crossover in the SlowSTO. Well, today's action said: "No way, come back another day!"

I hate to jog. I don't like the pain and discomfort of being out of breath. I didn't like it in boot camp. I didn't like in school sports conditioning, and I certainly don't like it now. But....there is much to be learned by watching others jog. We've all got 'em in our neighborhoods. Such vanity! If you've got a good field of view you can see when they pull up to a slow jaunt or brisk walk to catch their breath. Then after a respite they'll wind up again and take off in a speed accelerating sprint. Watch them regularly and you can pretty much tell when they're going to slow to a walk.

Investing in gold, and other investments is like a jogger's behavior. Joggers even halt more abruptly like stocks than they accelerate their rise. You don't know precisely when a jogger will resume his speed, only that ordinarily when he's about at the corner hydrant he takes off again. It all depends on how exhausted he was from his last sprint. Kinda like a Fibonacci retracement and expansion. Eventually you learn his rhythm. Like stocks, there's an ebb and flow.

You never know where or when a jogger will slow or accelerate his motion. You can pick out a house where in the past he's slowed, but then on next go-round he sprints three houses past where you anticipated his slowdown. These support and price level "house" targets too often fool you. What we need to do is watch how hard he's panting (momentum) when he goes by our house. Does he seem to be accelerating, peaking, or slowing down? What are the indicators telling us?

Never mind where, when or which house you think he'll end up, it's where he is NOW that you should be watching. That will better guide you as to where to put your money.”

WINNERS

LOSERS

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