Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Dollar vs. Emerging Currencies is a Boon for Silver

Commodities / Gold and Silver 2010 Nov 24, 2010 - 01:04 PM GMT

By: Dr_Jeff_Lewis

Commodities

Any careful observer of the Federal Reserve should be slowly coming to the conclusion that Bernanke is off his game plan.  In the past few weeks and months, Bernanke has repeated before Congress that his dual mandate is to provide for slow and gradual recovery, but low inflation and full employment.  Recently though, Bernanke is on a new tangent, a semi-mercantilist endeavor to lower the value of the US dollar against emerging economies.


As if the failure of the stimulus package and loose monetary policy weren't already clear from the sheer number of jobless and the general stagnation in the US economy, it is now clearer than ever that the Fed is fighting a moving target.  Spending didn't get the economy moving, negative real interest rates are engaging only simple speculation in financial markets, and now Bernanke is searching for a new outlet: international currencies.

In a monthly briefing to the House Financial Services Subcommittee, Bernanke alleged that emerging marketing currencies should absolutely rise in value against the US dollar, if only because their economies are growing several times faster than the American economy.  His goal, then, was made clear: if the markets do not allow for some appreciation in the value of emerging market currencies, the Fed, through quantitative easing, will make the dollar weaker, and by contrast, emerging market currencies stronger.

Get Ready, Silver

The new self-administered Federal Reserve mandate has its benefit for silver investors, primarily that emerging markets, in contrast to others, are some of the largest silver buyers. 

This provides plenty of newly discovered momentum to the markets, as each drop in the value of the dollar not only buoys silver as a monetary metal, but also because foreign purchasers can buy more of it.  India, for example, has an unquenchable thirst for both silver and gold, and despite growing differences between the US and Indian economies, the Rupee has yet to make a big move higher.  An appreciating Rupee and falling Dollar would allow for an even steeper incline in 2011 on stronger demand from India in its heaviest buying season.

Underwriting Metals

Americans are already swapping their dollars for monetary metals, and therefore, any foreign increase in demand, especially for what is considered to be a “dollar short,” is sure to send shockwaves through the markets.  Bernanke is now wielding a double edge sword.

While Bernanke was the first to admit he was underwriting the stock markets, it is even more obvious that he's now, directly or indirectly, underwriting metals.  It is important to note that while silver has appreciated rapidly in response to monetary policy measures, the full brunt of quantitative easing is not yet felt.  Not a single dollar has yet to emerge from bank reserves in the conversion from monetary potential to full-force kinetic energy. 

When the dollars do start flowing out of bank reserves and multiplying through the fractional reserve banking system, expect nothing less than rapid depreciation of the dollar, rising silver prices, and an even greater global appetite for monetary metals.  The fun has just begun.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in