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Weldon's Mini-Metal Monitor: FOMC and Gold...Which Way is Up?


In the context of our recent Money Monitor focus on the U.S. money supply dynamic, as relates to the first back-to-back monthly declines in U.S. Consumer Credit since 1992, we observe the path of the Morgan Stanley Consumer Index (CMR) relative to Gold, as exhibited in the chart below.

We note the massive consumer reflation during the nineties, into the 2000 high, followed by a breakdown, then a consolidation in 2003-2004. Now, we spotlight the most recent BREAKDOWN to NEW MULTI-YEAR LOWS in the CMR relative to Gold.

With nearly 3-months of FREEZE in mortgage-equity withdrawal, a sharp two-month rise in the 1-Year ARM Rate, flat-lined home price appreciation, exhaustion in fiscal policy, and crude still above $60...

... it does not take a rocket scientist to determine the macro-message emanating from the chart.

In China, "2006" is the Year-of-the-Dog.

In the U.S. it may be the Year-of-the-Dog for the Consumer!!!

This would be bullish for Gold, particularly if intensified consumer distress causes a dovish reaction from the Fed.
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