Friday, June 30, 2006
Gold Soars On Dovish Fed
The Street.com reports on golds break-out Friday. "Gold and other metals were sharply higher Friday amid a dollar selloff after the Federal Reserve gave a benign outlook about future hikes in interest rates. Gold for August delivery surged above the $600 mark, and was recently gaining $23.60, or 4%, to $612.50. Among other metals, silver for July delivery was adding 59 cents, or 5.7%, to $11.01 an ounce."
"The metals market, which was closed Thursday by the time the Fed delivered a quarter-point rate hike and made conditional comments about future policy, rallied overseas and at the opening of trading Friday."
"Commodities have sold off over the past month and a half amid worries that the Fed might lift interest rates too much, hurting a U.S. economy that is already showing signs of slowing. This, commodities bulls feared, would curb global growth and demand for raw materials. The dollar had also began rallying since mid-May on the prospect of further rate hikes."
"But the dollar plunged following the Fed's comments, and it continued to slide on Friday. The Dollar Index, which tracks the value of the dollar against a basket of key currencies, was recently down 0.7%."
"A report on personal income showing that the Fed's favorite inflation indicator, the personal consumption expenditures index, rose 4.1% in May failed to revive the dollar. In addition, a survey showing weakness in manufacturing activity in the Chicago economy in June reinforced expectations of a declining trend."
"Gold and metals had already began showing signs of recovery earlier this week. According to Michael Jalonen, metals analyst with Merrill Lynch, gold made a bottom when it closed at $560 on June 14, representing a 23% drop from its May highs. Since then, gold has benefited from safe-haven bids amid rising crude oil prices and tensions between the U.S. and Iran over Tehran's nuclear program."
"'If this is the case and the Fed does pause in raising U.S. interest rates, this would be a favorable development for bullion,' writes Jalonen. 'Given the plethora of favorable factors impacting bullion (Merrill Lynch's forecast for further weakness in the dollar, renewed fabrication demand in the fall and geopolitical tensions, to name a few), we believe bullion should rise back to the $650/oz level by early fall.'"
To be updated later today if additional news breaks.
"The metals market, which was closed Thursday by the time the Fed delivered a quarter-point rate hike and made conditional comments about future policy, rallied overseas and at the opening of trading Friday."
"Commodities have sold off over the past month and a half amid worries that the Fed might lift interest rates too much, hurting a U.S. economy that is already showing signs of slowing. This, commodities bulls feared, would curb global growth and demand for raw materials. The dollar had also began rallying since mid-May on the prospect of further rate hikes."
"But the dollar plunged following the Fed's comments, and it continued to slide on Friday. The Dollar Index, which tracks the value of the dollar against a basket of key currencies, was recently down 0.7%."
"A report on personal income showing that the Fed's favorite inflation indicator, the personal consumption expenditures index, rose 4.1% in May failed to revive the dollar. In addition, a survey showing weakness in manufacturing activity in the Chicago economy in June reinforced expectations of a declining trend."
"Gold and metals had already began showing signs of recovery earlier this week. According to Michael Jalonen, metals analyst with Merrill Lynch, gold made a bottom when it closed at $560 on June 14, representing a 23% drop from its May highs. Since then, gold has benefited from safe-haven bids amid rising crude oil prices and tensions between the U.S. and Iran over Tehran's nuclear program."
"'If this is the case and the Fed does pause in raising U.S. interest rates, this would be a favorable development for bullion,' writes Jalonen. 'Given the plethora of favorable factors impacting bullion (Merrill Lynch's forecast for further weakness in the dollar, renewed fabrication demand in the fall and geopolitical tensions, to name a few), we believe bullion should rise back to the $650/oz level by early fall.'"
To be updated later today if additional news breaks.
# posted by Ben Jones @ 11:21 AM 
Comments:
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Paulson mum about 'strong dollar'
Treasury Secretary breaks from predecessors by not discussing issue at confirmation hearing, leading some to believe U.S. won't object to a weaker dollar.
Treasury Secretary breaks from predecessors by not discussing issue at confirmation hearing, leading some to believe U.S. won't object to a weaker dollar.
Well, it has always been a given for the treasury to talk-up a strong US$. If this guy is neutral, is there any advocate of a strong currency left? It could be a serious sign, because there are many countries that do the same thing and their economies are basket-cases.
John,
If you guys want. I messed around with the code and it doesn't work very well. The reason I haven't used it is the delay in load time, but I will put it up if you want.
If you guys want. I messed around with the code and it doesn't work very well. The reason I haven't used it is the delay in load time, but I will put it up if you want.
...there are many countries that do the same thing and their economies are basket-cases.
And ours isn't? ;-)
All things considered, the gold boom will be right on schedule (just like the housing bust).
And ours isn't? ;-)
All things considered, the gold boom will be right on schedule (just like the housing bust).
"It WILL be repudiated."
that's why I've always disagreed with the hyperinflationary scenario of jim puplava.
that's why I've always disagreed with the hyperinflationary scenario of jim puplava.
It WILL be repudiated.
Of that I've no doubt either.
I just don't see how we could mimic Weimer Germany
Yet such things just seem to happen, don't they? Hasn't Heli-Ben already laid out such a game plan??
Personally, I don't claim to know how the USD will be destroyed, only that it's destruction is inevitable. Knowing how & when would be useful though, now wouldn't it? ;-)
Here's what scares me...
The USofA is the world's sole superpower, possessing the world's most capable military as well as the foremost nuclear capability. Countries, like their economies, are ultimately reflections of the emotional state of the people within them. What's to stop a scared & wounded nation from publicly repudiating all foreign debt, forcibly taking control of strategic resources around the globe, and daring the rest of world to do anything about it? Does anyone ever allow their standard of living to decline without a fight?
Of that I've no doubt either.
I just don't see how we could mimic Weimer Germany
Yet such things just seem to happen, don't they? Hasn't Heli-Ben already laid out such a game plan??
Personally, I don't claim to know how the USD will be destroyed, only that it's destruction is inevitable. Knowing how & when would be useful though, now wouldn't it? ;-)
Here's what scares me...
The USofA is the world's sole superpower, possessing the world's most capable military as well as the foremost nuclear capability. Countries, like their economies, are ultimately reflections of the emotional state of the people within them. What's to stop a scared & wounded nation from publicly repudiating all foreign debt, forcibly taking control of strategic resources around the globe, and daring the rest of world to do anything about it? Does anyone ever allow their standard of living to decline without a fight?
here is why I don't think hyperinflation can happen. the Federal Reserve and the banks are basically one in the same in our fractional reserve system. why would the Federal Reserve inflate away their power to create hundreds or billions of dollars out of nothing? why would the banks let that happen
who would be printing the money?
who would be printing the money?
Fractional reserve lending works both ways... put in $1, lend out $10; take out $1, call in $10. Most banks simply could not survive a deflationary spiral, so the Fed will do everything to prevent it. Still just "pushing on a string", IMHO.
You've seen Mogambo's rant on bank reserves; their leverage is immense and historically unmatched. Combine that with record exposure to RE/MBS and hyperinflation seems all but assured.
You've seen Mogambo's rant on bank reserves; their leverage is immense and historically unmatched. Combine that with record exposure to RE/MBS and hyperinflation seems all but assured.
and what will cause that hyperinflation? deflation. most financial assets like stocks, bonds and real estate will(and I think right now are) deflate. this will trigger a response in the world that is to print money. I lead towards a deflation and then an inflationary answer, like the depression. financial assets collapsed and then the New Deal launched inflation during the Great Depression.
EXACTLY!
Ben put up a weekend thread for mid-year predictions on HBB. Well, once YOY comparisons go decidedly negative, the media will lead a huge sea change in public perception of RE. The big public homebuilders will have no choice but to cut prices drastically to lure anyone into buying. Shazam! Instant, nationwide deflation, since (like 80's Japan) everything is tied into the value of RE.
Ben put up a weekend thread for mid-year predictions on HBB. Well, once YOY comparisons go decidedly negative, the media will lead a huge sea change in public perception of RE. The big public homebuilders will have no choice but to cut prices drastically to lure anyone into buying. Shazam! Instant, nationwide deflation, since (like 80's Japan) everything is tied into the value of RE.
(Will our leaders have the country fall into anther deflationary depressions again?)
they can't magically hold up asset values. they don't really have much say. they didn't have much say in the NASDAQ falling apart. same with housing. the only thing they can do is react to events that happened.
they can't magically hold up asset values. they don't really have much say. they didn't have much say in the NASDAQ falling apart. same with housing. the only thing they can do is react to events that happened.
Although we do seem to be surrendering our freedom & liberty on a daily basis -- the founding fathers wouldn't recognize their country -- I can't put much stock in these things either. Ultimately the people get what they want... or can be persuaded into believing that they want.
There's also the problems associated with controlling a relatively well-armed populace, among which the "tin-foiled hat" crowd are probably the best equipped. ;-)
That said, look at my "debt repudiation" scenario above. Who's to say the US wouldn't outright take over the US & Mexico in order to secure the resources therein? Would a new "Greater Depression" (combined with an Al Qaida nuke or two) scare the country into such action?
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There's also the problems associated with controlling a relatively well-armed populace, among which the "tin-foiled hat" crowd are probably the best equipped. ;-)
That said, look at my "debt repudiation" scenario above. Who's to say the US wouldn't outright take over the US & Mexico in order to secure the resources therein? Would a new "Greater Depression" (combined with an Al Qaida nuke or two) scare the country into such action?
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