Crude oil jumped nearly $11 a barrel on Friday, the largest one day price rise ever. These gains were triggered by a Morgan Stanley forecast that suggested oil would reach $150 a barrel by 04-Jul.

Comments from Israel's Transportation Minister, stating that Israel would have "no choice" but to attack Iran if they fail to abandon their nuclear program, sparked additional speculative buying interest.

Spiraling energy costs have been a significant contributing factor in the slowing of the US economy. Sentiment in recent weeks had been tipping in favor of a slow-down rather than a recession. However, Friday's announcement that the unemployment rate surged to 5.5% in May raises the specter of recession once again.

Look for the term "stagflation" to start getting bandied about again as well. Stagflation is the insidious combination of rising prices and a weakening economy.

American consumers are likely to hunker down further as they face growing worries about their jobs, soaring energy costs and declining home values. This does not bode well for the US economy, which derives 70% of GDP from consumption.

The stock market reacted accordingly, tumbling nearly 400 points on Friday. In addition, the dollar index dropped back into the lower half of its 3-month range.

EUR-USD surged back above the 1.5700 level on Friday and upside follow-through today has negated important resistance at 1.5814/19. These gains lend considerable credence to a retest of the 1.6020 record high in the euro that was set on 22-Apr.

Lehman Brothers announced a stunning $2.8 bln loss in Q2, well above analysts' initial expectations. Just last week, estimates were running around -$300 mln.

The losses are attributed to exposure to subprime and other complex debt securities. The loss was the first quarterly loss for the company since going public in 1994.

Lehman said it would seek to raise $6 bln in an effort to shore up its balance sheet.

There had been serious concern in recent weeks that Lehman was going to suffer the same type of crisis-of-confidence that led to the demise of Bear Stearns. It is likely that access to the various Fed liquidity facilities is the only thing that prevented this from happening.

Nonetheless, the Lehman announcement is a strong indication that the worst of the credit crisis in not behind us, as had been widely reported over the past several months.

The gold/oil ratio had climbed back above 7 early last week, but those gains were erased by Friday's surge in crude prices. We are still looking for a meaningful and sustained recovery in the spread. A rebound to 7 would put gold at 948/50 if crude were to hold steady.

Gold closed back above the 20 and 50 day moving averages on Friday, returning additional credence to the underlying uptrend.

Physical gold offers a liquid and convenient hedge against inflation, a falling dollar and general economic uncertainty. If you're looking to preserve your wealth in these turbulent times, a gold purchase made in June/July has historically proven to be below the annual average price.

Gold Market Movers:

Quiet US calendar: US pending home sales index for Apr at 10:00ET.

UK PPI input growth for May surged to a record high of 8.9% y/y.

Fuel worries prompt a 1970s flashback

Surging oil alarms Wall Street

Unemployment rate jumps to 5.5% as economy continues to shed jobs

US concern at ECB's hints of higher rates

Lehman to raise $6bn after first quarterly loss

AIG shares plummet on news of federal investigation of accounting procedures

Stock index futures suggest a higher open on Wall Street.