S&P has pulled the AAA ratings of the two major bond insurers, Ambac and MBIA. Moody's is apparently on the verge of doing the same. Fitch Ratings, the smallest of the major ratings services downgraded both companies to AA earlier in the year.

Without their AAA ratings, there is reportedly about $1 trillion worth of securities that the monolines guarantee that is going to have to be written-down.

If further write-downs are seen, a view that is consistent with Fed VC Kohn's testimony before the Senate Banking committee yesterday, look for the banks to turn to the Fed once again for relief. Mr. Kohn also suggested that further capital injections may be necessary.

One might question where that money is going to come from, but the following two charts offer pretty good clues. Both are viewed as pretty good proxies of the old M3 measure of total money supply.

All the expressions of concern about inflation and the state of the dollar have little consequence when money supply is expanding at the pace illustrated in these two graphs. Milton Friedman observed that inflation is a monetary phenomenon. How is this rather chilling fact escaping the notice of so many?

As pointed out in one of the article linked in Market Movers below, 12% annual growth in money supply compounded annually means that our money supply could double in as little as six years. Imagine the inflation!

How are you going to protect your hard earned wealth against that eventuality?

Gold is the obvious answer. Gold is bedrock.

And don't think for a second that this is only a US problem. Eurozone M3 grew at a double digit pace in Q1 as well. China and India have expansionary monetary policies that have led to high rates of inflation. In Zimbabwe they just keep adding zeroes to their all but worthless fiat currency, resulting in an inflation rate well above 100,000% y/y.

A pretty strong case for gold to move toward its inflation adjusted high of $2,400 per ounce, but that's a moving target. What might that adjusted high be later this year? Where might it be in 2013?

Platinum rallied on news that Merrill Lynch has raised their 2009 platinum forecast by 25%. Merrill is forecasting an average price for 2009 of $2,500 based on supply concerns. They site the ongoing power crisis in South Africa, the world's largest producer and suggest "more shocks" may be seen.

Brent spot crude has regained the $130 bbl level after recording a key reversal on Thursday (lower low, close above the previous high). This is a very strong technical signal, suggesting that the corrective low for oil is in place.

The EUR/USD rate also registered an outside day with a close above the previous day's high on Thursday. Again, a rather bullish signal, but since it occurred above the previous corrective low of 1.5289 (08-May) it doesn't really qualify as a key reversal.

The euro rebounded initially as a result of rather hawkish comments from ECB President Trichet that suggest a rate hike in the Eurozone is imminent.

With the Fed expected to leave interest rates unchanged later this month, anticipation that the interest rate differential between Europe and the US is going to widen further is seen as dollar negative.

A resumption of the long-tern downtrend in the dollar would likely result in a resumption of the long-term uptrend in gold.

Gold Market Movers:

US wholesale sales for Apr at 1.3%. The market is looking for about +0.5%.

US nonfarm payrolls for May -49k, about what the market was looking for, but the unemployment rate surged to 5.5%.

Canadian employment for May +8.4k, below expectations. Unemployment rate at 6.1%.

German industrial production for Apr -0.8%, well below market expectations.

Jobless rate soars to 5.5% in May

Ambac, MBIA lose AAA ratings from S&P

2013: Cost of living to double?

Will gold hit $1,500 an ounce?

Merrill raises 2009 platinum forecast 25% on supply

Commodities correction to draw in fresh investors