Despite the best efforts of Messieurs Bush, Paulson and Bernanke, gains in the dollar index faltered shy of the range high at 72.89. In fact the only major dollar rate that has broken out of its recent range is USD-JPY, which approached 108.00 in overseas trading.

Rising yields in the US and Europe have made the yen increasingly less attractive, making gains in USD-JPY and the crosses as attributable to yen weakness as they are to dollar strength.

All the chatter about the desire for a strong dollar and the expressions of concerns over inflation may have all been for show. With President Bush at the EU summit this week and Treasury Secretary Paulson meeting with his G8 counterparties this weekend, all the comments made for good headlines in countries whose export economies have been hurt by the weak dollar.

While no substantive action has been taken that might be even remotely construed as dollar positive, at least a show of resolve on the world stage was probably warranted.

Besides the political benefits overseas, the comments have succeeded in keeping the market off guard and increased volatility. This may make traders less likely to bet heavily against the dollar or in favor of oil in the short-term.

Yet, there seems to be a lingering concern out there. A worry that the coordinated and fervent nature of the jawboning is in anticipation of some dollar negative market surprise. It's anyone's guess what that might be.

In the end, talk not backed by policy is nothing more than a delaying action. The trends -- particularly if they are supported by strong fundamentals -- ultimately tend to win out.

For the record: The dominant trend in the dollar remains bearish. The trend in oil is unquestionably bullish. The long-term trend in gold remains bullish as well.

Another insidious result of record oil that didn't get much play yesterday is the impact on the trade deficit. Perhaps the one benefit of the weak dollar is that it makes US goods more appealing overseas and one might reasonably expect an improvement in the balance of payments.

However, imports surged 4.5% in Apr, led by a huge 9.1% oil-related jump in industrial products. This completely eclipsed the biggest gain in exports in four years.

The trade deficit deficit widened by 7.8% in Apr to -$60.9 bln. This completely offset (and then some) the 6.7% narrowing of the trade gap that was seen in Mar.

Any gains in exports are hard won. The US industrial base has declined significantly over the past several decades, meaning we have less to offer the world in terms of exports. That translates into an ever eroding capability to reduce the deficit.

Nonetheless, the US continues to consume -- far more than it produces. As the deficit grows, so does the influence of our creditors. These creditors take their dollar reserves and buy our treasuries in an effort to support the dollar and keep their own goods competitive.

That hasn't been working so well, with the dollar hitting record lows as recently as March. The US economy is completely dependent on a steady inflow of foreign investment, to the tune of $2-5 bln a day. Any significant cutback in that investment, could lead to a severe balance sheet recession.

If that were to happen, the dollar would plummet and gold would soar. A gold purchase made in the lower half of the recent consolidative range is likely to be viewed as a real bargain in the future.

Gold Market Movers:

Treasury budget for May at 14:00ET. The market is expecting a deficit of about $118 bln.

EIA crude oil stocks for the week ended 06-Jun -4.6M. A much larger drawdown than the market was expecting. Oil surges in reaction.

US MBA mortgage market index +10.9%; purchases +12.8% refis +8.4%.

French HICP for May shows inflation jumped to 3.7% y/y, versus 3.4% in Apr.

Inflation fears may push gold back to $1,000/oz

CFTC announces interagency task force to study commodity markets

Banks face $10 bln monolines charges

US and Germany warn Iran amid divisions