gold, page-45077

Dollar selloff on Friday triggered by news of progress in US-China trade talks. We'll see what happens. In any case a correction in the dollar rally was overdue. All technical indicators were overbought.

Important to watch how the dollar trades now. Last week, if you sold rallies it worked. If this continues then we can have more confidence in calling "a top."

Gold is up $8 ($1192 at last glance). Like the dollar gold was similarly at extremes (oversold), technically. Due for a bounce. It is holding early gains despite the dollar rebounding some. (So far.)

Stock averages closing in on new highs.

One note of possible concern.

I have seen a renewed slowing in bank credit and specifically, loans and leases in bank credit.



In the latest week loans and leases contracted by $13.7 bln. This was the largest weekly contraction since June 2012. Furthermore, the growth rate slipped to 4.6% y-o-y; the slowest in 11 weeks.

Let me say this could be a one or two week pause. That has happened before. Furthermore, even with the pause loan growth is still expanding 37% more rapidly than last September and loan growth HAS NOT DECELERATED since the May 23 bank bill was signed. That's a good sign.

I think the slowdown is temporary, but we have to watch it.

One final note: Federal spending is really accelerating now.It has ballooned out $4.2  trillion, up $155 bln over last year. That is the largest y-o-y positive gap so far and the spending is growing at 3.8% y-o-y, also the fastest growth rate.

In addition the budget deficit has climbed to $738 bln, That is the highest in 8 years. It's 3.6% of GDP. Very strong!

This is why I am not worried and it also may explain the slowdown in bank credit. Government spending is adding to income and savings, reducing the need for the non-governmental sector to take on debt.