Agreement bogus, says Kostohryz.

Mr 'K' read the text of the agreement and he says there is much less in it than touted by the Media.

This is a Summary of his comments in Seeking Alpha:

1. There are no credible details of HOW the Agreement will be implemented;
2. The European Stability Mechanism (ESM) is designed to dole out E500B for recapitalizing banks and buy bonds.
3. The banks will need E200B and the leftover is peanuts, considering that Italy alone needs to roll over some E2.5T.
4. There appears to be no way as yet to fund the ESM, since printing by the ECB is explicity excluded in the agreement;
5. Neither Italy, nor Spain can meet the financial conditions specified in the Agreement.

Mr 'K' predicts that as a consequence, the bear markets will resume.

Deflationary fears lessened.

I do not think that the European Summit solved the problems of Europe, but it did one thing: it showed the world that European leaders will not let the banks of Spain fail. This has reduced the fear of deflation considerably. On that news, gold rose to 1,604(up 3.47%) and silver finished the week at 27.58(up 5.08%).  The Dollar index sank by 1.13. Even gold and silver miners rose.

Almost unreported in the Media has been the expert meeting in Korea,where reps of European governments agreed on a 40T plan to renovate, replace infrastrucre and spend money on new things like ports, airports and power plants. All these events beg one question: where is the money coming from? European nations do not generate enough revenue (in fact they are running deficits) so an ambitious plan can only be financed by the ECB printing money. The Germans will be unhappy with the money printing, but they have to agree, just as they agreed to the bank bailouts without burdening the countries of Europe with more debt.

These events open the possibility to a number of things. Will Friday's rally in precious metals continue next week? And the drop in the value of the Dollar continue? Will interest rates on Treasuries rise now that the fear of deflation is lessened in Europe? And will the FED have to print if Treasury options turn sour along with the economy?

I continue to marvel at how Larry Edelson's forecasts keep missing. But, the biggest question is whether the correction in gold prices is over and gold will now resume its march upwards.

European Summit: Have they done it?

The European Summit has produced three agreaments:

1. Bailout funds will go directly to Spanish banks and will not increase Spain's indebtedness;

2. Tighter financial union.

3. Spend $120B on stimulating the economy.

No Eurobonds as yet.

Will this solve the problem? Well, stock markets are up along with some banking stocks, oil and gold. The markets do not view these steps as deflationary. Yes, but do they solve the debt crisis and the contracting economy?

In my humble opinion - NO. While, the direct aid to Spanish banks will be helpful, the debts remain. The tighter financial union seems meaningless to me. In order to achieve it, much must be done in terms of changing treaties and basic law. That will take time and is pushed by Germany only. Nor is it certain that the German Bundestag will approve of the bailouts as they stand. Finally, the stimulating of the economy. One hundres twenty billion dollars! Really? In the US, $800B did not do it. It is doubtful that $120B will do it in Europe.

What is slowing the European economy is the Socialism Europe practices. That and the gutting of the US economy by the Obama policies. Unfortunately, these continue. The debts remain and will continue to pile up.

Steps in a financial panic.

Step 1. Increasing withdrawals from banks (called bank runs).

Step 2. Capital controls imposed by the govt.

Step 3. Institutions and people piling into gold.

Spain has now imposed capital controls.

Spain: slouching toward panic.

Spain's brush with Socialist rule has exacerbated its economic plight. The Socialists ran up huge deficits, the banks bought up the bonds to finance the deficit and both the Spanish govt and Spain's banks are insolvent.

We can see the developing panic in bond rates the country has to pay and the state of its banks. Yesterday (Monday), Moody has downgraded 28 Spanish banks, some of them all the way to junk status. How come the banks are failing? Because they hold a lot of govt bonds and as the interest the govt has to pay rises, the value of the bonds with lower interest lose value. And the bond rates are skyrocketing. The latest auction ($3.9B) saw the interest rate on 3 month bonds rise to 2.39% from 0.85% and six month rates rise to 3.24% from 1.7% in May.

The increasing cost of borrowing raises the deficit, which calls for more bonds, which fuels the rise in rates which adds to the deficit. The process has become self-sustaining and is gathering speed.

Larry's latest.

Larry's latest this morning predicts a large drop in the price of equities to ramain liquid. This includes gold and silver. He reasons that the FED has refused to print, while European heads talk and do little else.

We get a different take from KWN. Michael Pento predicts that the ESM will come up with a rescue of  European bonds to the tune of E400-500B, while Jeffery Saut puts the size of the rescue fund at E2T. Pento believes that gold mining shares will fare better than gold itself.

In sum, the US exported its credit and housing crisis in 2008 to Europe and now Europe is exporting its sovereign debt crisis to us.

Meanwhile, economic slowdown has now spread to the emerging countries and their growth has been halved.

July should be an interesting month.

Why we must preserve Capitalism.

Simply put, Capitalism is a form of economics, where the flow of capital is determined by the open market. Because capital is allowed to flow where it produces the greatest profit, it is the most efficient economic system. Is it a perfect system? NO, but it is the best.

Look around in the world. Where Capitalism flourishes, people prosper. While, the extent of prosperity depends on the availability of natural resources as well, it is the degree of economic freedom (the ability of individuals or groups to invest their capital unfettered) that is the biggest determinant of their success. The most glaring example was the state of agriculture in the Soviet Union. In spite of having the best agricultural land in the world, the Soviet Union could not produce enough wheat to feed its population.

Socialists (and different versions of them) profess other priorities, such as equality or public welfare and put all manners of restrictions in the way of the free flow of capital. Hence, Socialism is less efficient. Socialists can stay in power only through the lies dished out by the Media and pushed by the education establishment.

Greece: the new Ragman Rolls.

I guess I better tell you the story of the Ragman Rolls, so the comparison will be obvious.

Scotland and Wales were conquered by King Edward the First of England. He made the Chieftains of the Scottish Clans sign a pledge, whereby the Scots denounced their sovereignity, conveying said sovereignity to the King of England. That became known as the Ragman Rolls. Edward also took the Stone of Scone, on which the King of Scotland was crowned.  During the reign of Edward the Second of England, the Scots revolted and beat the English like a drum. The story goes that Edward II was a Faigallah and repealed the 'don't ask don't tell' of his age and his army deteriorated. Be as it may, the English wanted to dialog and negotiate for peace.

The Scots were adamant. They wanted a large payment, return of the Ragman Rolls (so it could be destroyed) and also the Stone of Scone. At first, things were fine, the English paid the money they promised. The Scots thought that independence was just around the corner. And thus began the negotiations for the return of the Ragman Rolls. There were months of wranglings over such issues as who would participate, where they would be lodged, what route they would travel, who would provide the food and who would pay for it, the shape of the table and all such weighty issues. It is not surprising that negotiations went on and on untill the process became part of the English Language via the word "rigemarole."  I don't know what happened to the Ragman Rolls (some future Kings of England were Scots), but you can see the Stone of Scone today in the British Museum.

Now to Greece. The country is bankrupt and it has been in a recession for up to five years now. As a member of the EU, it was offered a bailout for promising to institute "austerity" which means a reduction of Greece's budget deficit, revision of labor laws, etc. Greece was run by PASOK (the Socialist Party) and New Democracy (NDP) was in opposition. NDP's head Mr Samaras opposed the bailout at least in principle. There were riots in Greece and an election in May. The two leading parties (NDP and PASOK) took a beating at the polls catapulting Syriza, a radical Leftist Party into the lead. Syriza opposed the bailout and wanted out of the EU. NDP and PASOK refused to join in a calition with Syriza, after all the Greeks have some sense, even if they can't run their country. So, there was an other election in this June. NDP came in first, closely trailed by Syriza, PASOK being a distant third.

This Monday, NDP, PASOK and a Democratic Left party formed a coalition. The Democratic left Party is opposed to the terms of the bailout, while Samaras remembered that he did not care for them either. So, the new government of Greece will try to renegotiate the terms of the bailout.The alternatives are not good. Leaving the terms in place might re-ignite riots. The Germans and French insist that the terms remain. If Greece does not get the next tranche (big gob of loot), it will default bringing down a whole bunch of banks. A rigamarole is under way.

Timid FED action stokes deflationary fears.

The FED had extended Operation Twist to the end of the year. It is obvious to anyone but the uneducated that a policy that is NOT promoting economic recovery would be greeted negatively by the investment community. Today's report of weakening manufacturing and continued poor jobs data is prompting investors to fear that the FED's policy will lead to deflation. We see the Dollar tack on 0.7 to jump over 82., gold dropping $50 so far and stocks tumbling once again. Oil has dropped below $80/bbl. The FED said that they will leave the door open, but waiting another month is not encouraging. Reports from Europe are not helpful either.

The lesson of the silver Quarter.

It gets hot in Texas in the Summer. You just need to adjust your attitude in June to endure what's coming in July and August: heat and drought. It is the reverse of the sign I have seen in Maine: "if you can't stand the Winter, you don't deserve the Summer. Here, it is if you can not stand the Summer, you don't deserve the Winter - when it is mild, cool and the living is easy (no chiggers or mosquitoes). What does this have to do with the lesson of the silver Quarter? Like the TV receiver says, step #2 is coming, we are almost there. When you work outside in the morning, your overall gets sweaty and when you come in, you empty your pockets in preparation for a shower and clean clothes. And that's when I saw it. A shiny silver coin among the ones I emptied from my pocket. I check the coins so I can reduce the weight by winnowing the load and collect the pennies, nickels and dimes, which later get turned in at the coin machine. And among all the tokens was this real piece of money.How I got it I do not know, but it was there.

After the shower and clean clothes I went and checked its current value and googled "value of 1964 silver quarter." That brought up a slew of websites, all eager to sell me silver coins. But, one of them (eBay) actually put a price to it: $104 for a face value of $5 (twenty Quarters). Let's see, that's 5 times twenty (roughly) at $5/silver Quarter. WHATTT!!!??? I shouted. Then it dawned on me. That is the consequence of going from silver coins to worthless metal stuff. The govt stole 95% of the value of currency by deficit financing, which is made possible by the fiat money. And the more is printed, the less the value. I bet that the average Obama voter can not see that, because they have been dummed down in school and might not even know how to multiply or divide. Otherwise, they would treat any politician who debases the currency by deficit financing as a THIEF.

The FED: Here is nothing, grab it hard.

An old Hungarian saying. That's what the FED offered today.

Let's take a look. Operation Twist has done little to stimulate the economy. So, the FED extended it to the end of the year. Underwhelming.

Meanwhile, the Greeks formed a coalition government: NDP + PASOK + another but small party. As George Wallace would put it "there isn't a dime's worth of difference" between NDP and PASOK. The new govt would like to renegotiate the terms of their bailout. Good luck. A bailout is offered for Italy and Spain as well. Will Spain agree to austerity and drive its depression deeper? Will Greece?

Meanwhile, the French are lowering their retirement age and are going to hire 10K new govt workers. Just the thing that a faltering economy needs. Amazing!

Force majeure.

In case you wonder why forecasts work so little lately, it can be explained by the simple Latin phrase: force majeure, which translates into English as "superior force." Central banks and their proxies are simply overwhelming normal market forces. There are consequences though, just as there were consequences of the central planning in the Communist-run countries. European Social Democracies that practice soft Socialism are bankrupt (yes, even Germany), but their central banks keep them going by covering their deficits by bonds (or bunds in Germany). The same forces keep gold prices capped. How long before this distortion of the Market blows up? Hard to say. It won't go on ad infinitum and will certainly not improve the economy.

In the meantime, "our" colleges and universities are miseducating young people to the extent that they accept concepts which are, well, insane. I remember the University of California student who insisted that the shortfalls of Socialism could be made up from the government "generating money." Come to think of it, this insanity is now part of the economic planning of Western countries. The same student was taught that deficits do not matter, because "we owe the money to ourselves."

There is a new Left wing insanity in town and it is called the "equivalence theory" of David Ricardo. According to the hallucinations of some so-called Economists, there is no difference between levying taxes to cover government spending or borrowing an equal sum.

We should not be surprised that once an insane theory is accepted, other insanities flow from it. For example, Ricardians expect that high deficits somehow encourage business and citizens to increase their savings IN ANTICIPATION OF higher taxes. As a consequence (they claim) the stimulatory effect of deficits are negated by higher savings rates. This insane theory is meant to excuse the failure of the $800B stimulus. However, the stimulus failed not because people increased their savings rate, but because the stimulus was meant to protect various government workers while the Democrats switched us to soft Socialism. And Socialism does not work.

Greece: the World moved on.

Sunday was the day of a new election in Greece, because the election in May was inconclusive. It resulted in a a win for the "Conservative" Party, the NDP. The Greek system gives the winning Party another 50 seats and with that the NDP has 137 seats to Syriza's 73 and PASOK's 33. In order to form a government, NDP needs a coalition partner. Since, Syriza is not willing, that means a coalition with the Socialists, PASOK. And thereby hangs the tail. A coalition between NDP and PASOK can only happen if NDP accepts the premises of the Greek Socialists: continued redistributionist policies - in other words, continued economic failure.

The election was a transgenerational contest between the older generation that accepts the promises of the Socialists and the "Conservatives" to live on borrowed money, vs the younger generation that wants to get off that thread. Unfortunately, Syriza is a radical leftist group and it has as much chance of instituting successful changes as did the Obama regime: meaning slim and none.

So, Greece is back where it started: unpayable debt, economic depression and political uncertainty. The country will run out of money next month and will need another bailout. No wonder the investment world was underwhelmed by the outcome of the Greek election.

Meanwhile, the G20 nations are promising a plan to promote growth. How? We will have to see, but do not hold your breath. And the World has moved on. Greece is no longer the center of attention, Spain is. And Italy.  

The Rain in Spain.

Spanish bond yields hit 6.96% today, which is the rate Spain has to pay on borrowing money for 10 years. This follows Moody's downgrade of the country's debt from A3 to Baa3, which is one step above junk.

That is not the end of Spain's problems, only the beginning. As the emergency loan of E100B is slated for now, that E100B would be added to Spain's national debt. This alone would add E7B to Spain's annual deficit.Undermining this "fix" is talk of selling off bank properties, which would transfer anything of value at fire sales prices and leave Spanish banks holding underwater mortgages. That is not going to happen. So, what will happen?

Waiting.

World-wide rain of stimulus.

The imposition of 'mark-to-market' accounting in the midst of sliding real estate prices achieved its intended aim: it elected Obama. But, it had other effects; namely, the destruction of a lot of capital. In addition, Obama's nationalizing GM, the mortgage industry and student loans destabilized the banks and led to further capital destruction. The subsequent economic slump was world-wide. The slump aggravated the financial crisis of Europe, which suffers from too much debt.

Governments world-wide are responding by stimulus packages to restore what they consider acceptable growth. China has lowered bank rates and banks can increase their discounts. India is accelerating port and terminal construction and power generation to combat their growth rate falling to 5.4%. Japan has printed gobs of money and so did England.

This leaves two areas where stimulus is not raining from the sky: the EU and the US. Fed members are calling for more stimulus in the US and the FED is meeting very soon. Financial experts expect a form of QE3, though its form is not known. That leaves the EU.

By now it is clear that "austerity" is not solving either the recessions of Greece, Spain or the rest of the EU. It is the resistance of Germany to stimulus that is said to stand in the way of more printing by the ECB. However, default by either Greece, Spain or Italy would jeopardise German banks and Chancellor Merkel is reported to be changing her mind.

Odds are that a concerted stimulus is in the works.

European crisis intensifies.

The most immediate sign of the fiscal crisis is the bond rates Italy and Spain have to pay. Yesterday, Spain's rate jumped to 6.67%, a near record. PM Rajoy had appealed to the ECB to step in and stem the crisis. Meanwhile, at the Italian auction of 1-year bonds, interest rates jumped from 2.34% to 3.97%! Italy has another auction of 10-year bonds on Thursday.

There was an article on KWN yesterday chiding the Germans for their fear of the inflationary effects of money-printing by the ECB. The post claimed that after the hyperinflation of the Weimar Republic (the event that made Germans reluctant to accept inflation), it recovered and that the subsequent rise of Hitler (and National Socialism) was due to the Depression, not the money printing.

German banks are stuffed full of bonds of Greece, Italy and Spain and if any of these countries defaults, German banks are toast. Clearly, austerity is not solving the crisis and dribbling out a few billion Euros here and there is not doing it either. So, the crisis intensifies.

Aftermath of the Spanish rescue.

The rescue of Spanish banks was hyped and met with euphoria. Stock markets rebounded. Then people looked at the details and the euphoria disappeared. What is wrong with the bailout? Let's count them.

1. The problem of the Spanish banks is that they lost a lot of capital, because of bed loans. Giving them more loans does not solve their problem. They need to be recapitalized.

2. The rescue package is for 100B Euros but independent research puts the Spanish capital need at E350B. Once again it is too little too late.

3. The bickering is already under way as to what fund will provide the money and under what circumstances.

How did the Markets respond? Well, the Stock Market gave up all the euphoria gains and took itself down another chunk. The bond markets fared little better. Spanish interest rates jumped to 6.465% while Italian rates moved to 6.004%. Anything above 7% will drive these countries into default, unless bailed out.

There is no news of the reported (or is it rumored) grand package planned by the FED, the IMF and the ECB.

The Spanish rescue.

OK, so the Spanish banks have been rescued by injecting $125B into the banks. Where is the money coming from? It is a bit shadowy at this point - from Spain's neighbors, we are told. Surely not? Spain's neighbors are running deficits themselves! So, who pays? I suppose we will learn at some future date.

While, this will reduce interest rates on bonds, it does not solve the crisis that is gripping Europe. The EU does not produce enough economically to run all the govt programs. They can not raise taxes (already too high) and they can not pare govt benefits (people will riot). Implicit in all the economic models is the concept that European debts will never be repaid, they will just borrow more to pay bondholders an interest and keep enlarging their national debts.

Ever since the election of an admitted Socialist as France's President, the French look on economics upside down. The French had reduced retirement age to 60. Now, how does that increase productivity? It does not. In fact, French deficits will grow.

How about the United States? We are following the same path, but faster. The US is running a deficit of 40% of govt spending and there is no prospect of the current regime reducing the deficit, let alone balance the budget. In fact, THERE IS NO BUDGET. The Budget proposed by Pres O'Bungle has received ZERO votes in the Senate and the Budget passed by the House has been voted down by Senate Democrats. The reason the Country stays afloat is that the Dollar is used as an international currency, so the FED can print it and buy Treasury Notes to finance the Deficit. Everybody knows that this can not continue forever. When we reach the end it will come swiftly.

Giles.

Giles.




He patrols by the house, you snakes all beware,

Raccoons, possums and squirrels, you take care.

A hundred pounds of fury glides, silent in the night,

Now he is silent to everyone's delight.



When that mouth opens up, his voice will shake the air,

To think of him as vicious would not be all that fair.

'Cause if you are invited in and settled in a chair,

He will let you pet his head and throw balls in the air.



Frankly I am all delighted he keeps such troubles out,

That he would defend both of us, of that I have no doubt.

So, if you're an urban Democrat, listen to me, hear?

May God bless and keep you far away from here.

Coming QE will be big.

The world is heading for a deflationary Depression. Von Greyers thinks that the next QE will be big, involving a joint action of the FED, IMF and the ECB. Look at the weekly gold price:

There are two factors involved here:

1. Postponing action beyond the next FED meeting would make it difficult to influence the Stock Market in a positive way.

2. If Deflation is allowed to take hold, it would reduce earnings AND make it tougher to finance deficits.

It is still possible and even likely that there will be at least one attempt to beat down gold prices. Some entities are now so short on gold and silver that if gold prices go up, the shorting banks will take a serious hair cut. Just as Goldman Sux did.

So, how fast will gold prices go up? Hard to forecast. It will depend on the nature of what the Central Banks will do. Operation Twist did not work.  And unless the next QE is big, they might as well forget about it. Krugman has been chiding the regime (including Bernanke) that the stimulus packages have been too small and the House will not agree to increased spending.

London Trader says...

that during the latest takedown of the gold price, the bouillon banks sold 515 tons of paper gold to drop the price. There was no actual physical gold sold, so these banks owe over 500 tons of gold to whoever bought the contracts.In fact, there is a shortage of deliverable silver and gold. What is important is that the bouillon banks knew that Bernanke would bluff and deny that QE3 is coming and used that info to try to drop gold below the 1,550 level. It did not work for long. Meanwhile, Soros has again loaded up on gold. He knows what is coming.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/6/8_London_Trader_-_Staggering_515_Tons_of_Gold_Sold_in_4_Hours.html

Bernanke tease unnerves markets.

Bernanke testified today that the FED stands ready to help, but not now. His basic push could be interpreted as a push at Congress to raise taxes. The Markets faltered until the news that China is easing credit again. Financial markets reacted as expected: 1. Spain's bond auction went off at 6.12%, Italy's last auction was at 5.61. Greek unemployment hit 22% and Greece is running out of money. Spanish banks are bankrupt and Spain can not meet its deficit target. Everybody is looking to the Greek elections on the 17th and the FED meeting on the 19th. Gold fell to 1,590 thus it can be said to have bounced off its 200 DMA. Back in the correction.

What ails the world?

The Economist has an article that has been referenced by a nationally syndicated program. The world's debts are calculated as 70T US Dollars on which has been issued $700T derivatives. The debts are 300% of the world's economic output in a good year. Even at a 3% annual interest, $3T has to be covered from govt revenues. We see then why things like QEs do so little stimulating. And if people refuse to buy the bonds at the current low rates then governments will have to digitize $3T year, which will increase inflation, which will increase interest rates even further.

What is the ultimate solution? Services must be privatized and governments must balance their budget. And we have to have gold-backed money which would involve a devaluation of maybe 90% of fiat money.

Markets hesitate.

Gold

Gold has clearly ended its correction on the first of May, as it broke above 1,600 on heavy volume. Since then it has tried to rally, but it is sold beck to the 1,620 level. It is said that Buyers are waiting to see what the ECB and the FED will do.

Contrast this to the DOW. It, too broke out and yesterday it added almost 300 points. But, it did so on relatively small volume. Investers expect the FED to print (along with the ECB), which will raise equity prices. Ironically, the FED won't print unless some further bad news, like a weak Market signal.

More on moneytizing gold.

KWN reports that the Bank of International Settlements (BIS) is considering making gold a Tier 1 Asset. This would give gold the same status as US Dollars, the international currency for now.

This raises a number of issues. Just what would be the value of gold? The outstanding US Dollars is about $8T, while the value of gold producers is not even $1T.

I will post on this as I can see more data.

So, what does Larry say?

Larry Edelson is back to forecasting doom and gloom (and later boom). He reasons that like in 2008, people will sell everything they can just to be in cash, so the value of the US Dollar will continue to rise and gold and silver will drop. He forecasts that by the end of July gold will be down to maybe 1,300 and the DOW to 11,500.

Larry should read the numbers. People are not short of cash as they were in 2008, so they do not need to sell everything. Sure, they are selling stocks, but they are still buying bonds (mostly treasuries) and gold is holding above 1,620 as I write this. Something else that has not reached Larry in Thailand is the fact that Friday's massive rise in gold was due to short covering. If people believed as Larry does, that the EU will disintegrate (causing the US Dollar to rise and gold to drop) why would they cover their shorts now?

Something else Larry ignores: the desire of Europeans to hang on to the European Union. The EU is a guarantee that Europe will not have a war (at least not internally). This is very important to Europe. Sure, there is a lot of bickering on how to save the EU and the Euro, but abandoning it is unthinkable. There are a lot of smart people working on it. They kick the can down the road till they eventually do something. Will it work? Only time will tell.

I am not like Larry. I do not have the experience in commodities like he does, but I know one thing. Unless gold prices bounce off the 200 DMA, the correction is over. The Central Banks (including the FED) have to print money to stave off disaster and that expectation will fuel the rise in gold. Socialism has to be abandoned, but that can not be done immediately. Retirements must be privatized so people can earn a chunk of economic growth and the government's role is to be reduced. Socialism simply does not work.

Cheddaring cheese.

I had gotten into cheese making at the urging of my wife (waff as she is designated in Texas). Getting the equipment, finding and using recipes, deciding what we liked, preservation, etc had taken time.

By now I have mastered Swiss cheese, Havarti, Caerphily, Manchego and the quick Mozzarella. I had given up on Camambert, waiting for better times to make Blue cheese and I am studying cheddaring.

Basically, cheddaring is cooking the curd at low temp, 100F. So far, I have tried two ways of doing it. One is by stirring the curds at 100f in a pot and the second is my own modification. After I have sliced the curds into 1/2 inch layers, I put them into bread pans and floated them in 100f water in a canning pot. I poured off the whey after each 15 minutes and rotated the slices. The slices cooked and became somewhat rubbery. After an hour, I tore the slices into 1/2 inch chunks and pressed them. The method calls for pressing at 50 lbs overnight then an extra day. Why? Because the pieces are hard to press into a solid piece.

I will report back in a couple of months.

Answering comments.

This Blog has changed for the better. For one thing, it has gotten easier to mix pictures (graphics) and text. For another, it is easier to find your comments. Yes, Kathy, marinated mozzarella is planned as well as the roulade (rolled cheese) with sun dried tomatoes and basil.

Eurobonds: moneytizing gold.

There are some reports out of Europe that some countries want an Eurobond that would spread the risk equally over all nations in the EU. The Germans called this 'having a credit card guaranteed by Germany.' Another possible solution is to use a nation's gold to guarantee debt above 60% of GDP. This would certainly help Italy, but only if gold were revalued much higher.

Hmmm. Interesting.

Gold: Correction is over.

Those of you who follow this blog may have wondered when my prediction for a new high in gold did not materialize as I expected, namely, during the last week of May. I will add that the method used (graphing the duration of corrections in gold and the days till  a new high) is far from exact. During the correction, we had all kinds of jawing that we should not be in gold. I will not repeat the nonsense hey wrote.

So, what is the evidence that gold has broken out? First, here is the gold price itself.

Gold was making a wedge and broke out on the upside.The breakout was on large volume, produced a positive MACD in the short term and reached the 50 DMA. True, if gold bounces off the 50 DMA then the breakout is aborted. Note also, that the volume in these contracts was large, even before the break out.

The second graph shows the strength of gold, i.e. the break out happened even though the US Dollar has been rallying for weeks.

The opposite has happened to the Industrials, which broke through its 200 DMA as foreshadowed by the DOW theory signal I wrote about,.

Is the break out in gold confirmed by the other measures? Previous break outs in gold were not confirmed by the action in gold mining stocks. The graph above this text is the graph of junior exploration companies. There is a sizable jump in prices and again the volume is large.

The graph above shows the action in the more senior exploration companies. The break out is confirmed though the volume is not impressive.

The gold miners have begun to rally earlier, but they, too, confirm the break out and on large volume.

Finally, silver also advanced, but the rally was not as spectacular.

What set off the rally in precious metals? Some pundits attribute the rise to the comments of Berlusconi (former PM of Italy) that if Italy does not get some relief with its debts, it's good by EU. I disagree with Bunga-bunga. What set off the rally was the admission by the Labor Dept that previous employment figures overestimated job numbers. The economy is sick and both Europe and the US must print, which will decapitate the rally in the US Dollar.

We will see Monday.