Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Dollar Bottom and Higher Interest Rates are Negative for Gold and Silver

Commodities / Gold and Silver 2010 Dec 17, 2010 - 04:30 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleWhile this is not the last thought we will have this year, it is the last thoughts on Gold we will send to you in 2010. With a new year in about to about two weeks, perhaps it is time to clear our heads. We will soon be given a fresh calendar on which to record the unfolding of events. Out heads should be also ready to receive that newness for yesterday will not be repeated.


Thus far 2010 has unfolded about at the center of, rather than the fringe of, the thinking that had existed a year ago. U.S. dollar did not vaporize. $Gold is still well below $10,000. Silver is still well below the $100 fantasy of the delusional. The Euro is still with us, and will be with us at the end of 2011, and 2013, and 2050. Bets to the contrary are foolish.

US Dollar Chart

As the above chart portrays, the U.S. dollar appears to have put in an important bottom. That bottom roughly coincided with the U.S. election which essentially ended the reign of financial terror by the Obama Regime. While financial sanity has yet to develop in the spending habits of the U.S. government, tendency for trend to become more negative has been halted, for the time. Removal of the minions of the current U.S. regime was the first tiny step toward resolving the insolvency of the U.S. Such is enough reason for at least an intermediate bottom in the U.S. dollar.

U.S. electorate has moved to remove many of the more dangerous of the financially irresponsible in U.S. Congress, though many still remain. Message from voters in an election representing the greatest political structural break since 1932 should be heeded. To presume that this shift in the political structure will tolerate a Federal Reserve running amok for the third time in a decade may be naive. Bernanke's gang of Keynesian ideologues and their policies of repetitive asset bubbles are not likely to be tolerated. We suspect that by this time next year Bernanke will be pursuing other opportunities.

That all said, the U.S. dollar, as shown in the above chart, is correcting an over bought condition. As that is accomplished, the basis for a further advance in the dollar's value will be created. We note in that graph the similarities to the previous bottoming process that led to a substantial rally. In such an environment, $Gold is not likely to advance as many emotional forecasts might suggest.

10 Year US Treasury Rates

Part of the reason for this view is the above chart of 10 year U.S. Treasury rates. In it we can observe that the markets have determined the policies of the Bernanke Gang are unacceptable. These rates have risen in an unprecedented fashion. With the Federal Reserve monetizing the Obama Deficit, the price of bonds should be rising and interest rates falling. Rather, as interest rates on these bonds are rising, we know that bond prices are falling. Markets are often more powerful than governments.

This interest rate action is supportive of the U.S. dollar's value. By definition then, higher rates are also a negative for value of $Gold. When market conditions are negative for the value of $Gold and the media is filled with fantasy forecasts, watching rather than buying is the prudent course of action. Those forecasting unrealistic prices for $Gold and $100 Silver will not cover your losses.

That all said, in every market are opportunities for someone. One of those building opportunities is with Canadian $Gold. Over valued Loonie is depressing the price of CN$Gold. Given the level of risk building in the Canadian economy and the extremely over valued Loonie, Canadian-based investors may want to begin again to average into the Gold market.

Risk in the Canadian economy is high, and we may be observing a mini-Ireland being created. For this we read from bloomberg.com, 14 December,

"Canada's top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years."

"Bank of Canada Governor Mark Carney, Finance Minister Jim Flaherty and Prime Minister Stephen Harper said in separate public appearances that they are concerned about rising debt. The ratio of household debt to disposable income in Canada was 1.48 in the third quarter according to Statistics Canada, exceeding the U.S. level of 1.47." [Emphasis added.]

In any event, we wish you all the best in the new year. Remember, history is guidebook, not a plug and play software template.

By Ned W Schmidt CFA, CEBS

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS as part of a joyous mission to save investors from the financial abyss of paper assets. He is publisher of The Value View Gold Report, monthly, and Trading Thoughts, about weekly. To receive these reports, go to www.valueviewgoldreport.com

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 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