Good Morning,

Overnight action in gold was fairly subdued as participants decided to wait the ECB decision out and did not opt to take on significant positions ahead of the long weekend coming up. New York spot bullion opened mildly on the defensive, quoted at $944.30, down $1 as participants geared up for book-squaring after a third week of robust gains. Risk aversion ahead of the holiday weekend showed up in fewer fresh positions being added, although the $950 target remains almost as tempting as the lure of profit-taking after the recent sprint in prices. Silver was showing small gains, adding 3 cents to $18.40 while platinum continued lower, losing $11 to $2044 and palladium gained $2 to $465 per ounce. Stories about GM's woes (specifically, the B word) continue to swirl in the background and pose some roadblocks to the noble metals' continued advance.

Amid plenty of internal discord regarding the wisdom of the action, the ECB this morning did follow through on its previous jawboning and hiked interest rates a quarter point. Interestingly (at least in the first fifteen minutes thereafter) the dollar did not swoon and fall through the floor on the news, as either the decision had largely been factored into the price or as participants sold the news after having bought the rumours. However, the day is still young and we have employment data coming our way, plus the reality of an oil price that has now surpassed $145 per barrel and does not appear to want to slow down before the self-fulfilling $150 prophecy materializes.

The June jobs reports indicates that 62000 jobs were lost in the month and that the overall rate held steady at 5.5%. According to analysts, the report is mixed, the numbers not very good, but (in their opinions) not recession-flavored. In the minutes following the release, the dollar held steady at 72.10 on the index, oil also held steady at $145, but gold was off $10.10 at $935.00 per ounce. Basically, gold has now run out of negative dollar news fuel and its holders were content to cash a few additional profitable chips before that (very much closer) fishing trip to the very nearest lake. Coming days still smell like dollar intervention to some floor traders we spoke to.

Millions of Indian truck drivers put their vehicles' parking brakes on today to protest the soaring price of fuel. The isolated actions by the men and women keeping the global economic blood flowing could well turn into one massive concerted work stoppage that could send a warning flare of major proportions to producers, speculators, and legislators alike. This could include thousands of furloughed airline employees, about-to-be furloughed auto workers, and the list goes on. Having cut through $100 like the proverbial butter knife does not mean that $150 or $200 will be easy pickings for oil given the massive fallout of global consequences that such values could engender.

Henry Paulson sees the greenback as having had something to do with oil prices going ballistic, but his take is that it is only a small part of an equation which has seen a 25% drop in the greenback translate into a five-fold explosion in crude oil. He sees supply and demand at the core of the oil phenomenon - this, while legislators in his country are digging in the dirt trying to find the index fund culprits who might be the real cause of the current price of Texas Tea. Mr. Paulson also believes that inflation and the combat thereof has now taken centre stage on the global economic and central bank policy arena. At least as far as the ECB is concerned, that appears to be the case, despite protestations from Monsieur Sarkozy about the state and possible fate of the Eurozone economies in the wake of higher borrowing costs.

This is all we now have time for. Look for an expanded version complete with a weekend reading assignment in the afternoon post. Watch that dollar. Do not discount dips to $925 in the wake of the rate/oil/jobs nebulosity.

Happy Trading