Mover Mike

From Forex,

A number of Middle Eastern central banks said on Tuesday they would seek to switch reserves from the US greenback to euros.

[...]

The head of the United Arab Emirates central bank, Sultan Nasser Al Suweidi, said the bank was considering converting 10 per cent of its reserves from dollars to euros.

“They are contravening their own principles,” said Al Suweidi. “Investors are going to take this into consideration (and) will look at investment opportunities through new binoculars.”

Foreign Exchange USD Finance

For the USD there were some ominous developments.

First, the weekly close of the USD against a basket of currencies is the lowest close in 2006. The USD closed the week at 87.77. Next support occurs at the Sept. 2005 low of 86.25. We are breaking down out of a weekly head and shoulder chart pattern, so I expect the September low to be broken, and a target of 83.00 would be the result.(see chart)

Second, the precious metals were on fire this week, with Gold gaining $35.70 to $632.20 and Oil gaining $5.85 to $75.17. It is interesting to note that the first Oil high of $70.85 came in the week of Sept. 2nd, 2005, the week that the USD bottomed and Gold broke out and began it run from $450 to its high this week. That could mean that both Oil and Gold are now in gear for much higher price as the USD moves lower. Its like passengers on the Titanic seeking the safety of the lifeboats.

Third, Le Metropole Cafe, the best source for news about gold, reported Friday

Sweden's central bank said it had slashed its dollar holdings almost in half.

The Riksbank revealed that it had cut the proportion of dollars in its reserves from 37 to 20 per cent, as well as selling off all its holdings of yen, which previously amounted to 8 per cent of its reserves

The choice to replace the USD is

the most liquid alternative, the euro," said Chris Turner, head of FX strategy research at ING Financial Markets, who reiterated its view that the euro will return to $1.35 by the end of the year.

Fourth, from Reuters

The overall message that markets will take away from finance officials from the Group of Seven rich nations who met on Friday is quite simple: The dollar will decline.

The G7 also said

greater flexibility in China's yuan is needed to allow "necessary appreciations." (emphasis added)

Do you remember Meg Richards? Here's what she said again:

Usually investors buy gold when they're worried - about inflation, the value of the dollar, the stability of the markets or geopolitical events. But in the face of low inflation, stable bond yields and a stronger-than-expected dollar, gold has surged to 25-year highs, closing at $595.30 Thursday before retreating to $588.85 on Friday.

Where's the strong dollar now? It wasn't there and investors outside the US know it and we've been getting Spin!

USD Gold Oil Finance

A couple of thoughts:

Whether you admit it or not, we are at war and most of the American people don't admit it.The idea that we import over 60% of our oil from countries like these

February, 2006, Crude Oil Imports (Top 15 Countries) (Thousand Barrels per Day)

MEXICO--------------1,774
SAUDI ARABIA------1,418
NIGERIA--------------1,342
VENEZUELA----------1,175
ANGOLA--------------464
IRAQ-------------------444
ECUADOR-------------222
BRAZIL----------------164
ALGERIA--------------163
KUWAIT--------------152
COLOMBIA-----------108
CHAD------------------77
EQUATORIAL GUINEA--73

makes us extremly vulnerable to cutoffs of oil. Why we allow environmentalists to dictate where we can drill for oil is beyond me. We currently make parts of Montana and Wtoming and Utah off limits, offshore California and the Gulf og Mexico offlimits and the North Alaskan coast, where you and I will never go, offlimits. Imagine the money that our enemies or countries with opposing interests are accumilating. That gives them leverage over our interests. China, for example, currently owns over $850 Billion of our treasuries.

2004 UPDATE: US Imports total about 61% of consumption: 13.12 million barrels per day in July 2004, out of total consumption of 21.4 million barrels per day. At the end of 2005, US production was at the lowest point since the late 1940s (4.86 million b/d) and imports accounted for 67% of total consumption.

During WWI, I quoted Steve Forbes who wrote

To help mobilize for the war effort, Washington seized railroads, as well as the telephone and telegraph industries. War boards were established that gave Washington huge powers over the private sector - allocating raw materials, setting prices and wages, closing and opening plants, and controlling the prices, production, and distribution of food - all in the name of boosting wartime production.

Bernard Lewis wrote in The Crisis of Islam

Islamic tradition maintains a double standard when it comes to matters of war and peace. “It was perfectly legitimate for Muslims to conquer and rule Europe,” noted Lewis. “It was a crime and a sin for Europeans to conquer and rule Muslims.” In other words, international moral norms do not apply to Islamic states because it is lawful for Muslims to begin an aggressive war against infidels. From a Western point of view, Islamic notions of war and peace are unsettling.

That means all our talk and diplomacy is not a solution. Jeffrey R. Nyquist asks what is the solution and answers:

There is no solution. There is only a problem that worsens over time. Everything the U.S. and Israel might do would only deepen the crisis. Those in the Islamic world who hate the U.S. will grow in strength. The threat to Western energy supplies will increase day to day. The intractability of the Iranians and others will blossom. Given all this, an economically damaging outcome is assured. The parties to this dispute aren’t going to kiss and make up.

Again, it is time to wake up!

Islam Iran oil

Update:

The June contract of the USD has broken its last major low and closed below 85.97 set in September of 2005. (see chart) This is the lowest weekly close since May 6, 2005. That is a loss of 7 1/4% in the USD versus a basket of currencies since November 18, 2005.

Gold traded as high as $655.30 and settled at $651.60.

Silver hit a high of $14.52 on May 19, corrected down to $11.70 and today closed at $13.51. Silver appears poised to take out the last high.

Remember the highly paid consultant, Jeffrey Christian at CPM Group. His plan was to sell gold in April and buy it back in November. Since March 31st gold is up from $581.8 to $651.60. His latest advice about silver? Glad you asked. Four months ago he said the range for silver would be a range of $7.50 to $10.50, with an average of $8.66. Wrong! Now he says that the silver market is going to be in surplus next year (I assume therefore, he is predicting falling silver prices.) He will be wrong again. Some people are just overpaid.

USD Gold Silver Jeffrey Christian