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GOLD THOUGHTS - Shock of Rising Interest Rates Presents Gold Buying Opportunity

Commodities / Gold & Silver Jun 13, 2007 - 12:02 PM GMT

By: Ned_W_Schmidt

Commodities Reality can truly be a shocking experience. For more than a year, paper equity markets have been deluded into thinking interest rates would decline. Suddenly, looking around the world the discovery was made that interest rates in most countries were rising or were going to rise. Decades ago, the U.S. set domestic interest rates. Today, interest rates are controlled by global investors.


GOLD THOUGHTS - Shock of Rising Interest Presents Buying Opportunity for Gold and Silver

At the margin, U.S. interest rates will be set by central banks of China, Japan, Korea, and others. With U.S. interest rates more likely to rise than fall, fantasy forecasts for U.S. economic growth will fade. The next phase of the collapse in housing & mortgage markets is now in sight. Rising rates also means that the hedge and private equity funds' leveraged mania is on seriously borrowed time. As the U.S. moves into a paper asset bear market and a financially dysfunctional state, dollar has only a long-term down trend.

The graph portrays year-to-year change in U.S. export prices. This measure gives some insight into rate of dollar inflation in the world. Globally, dollar inflation is rising as world is awash in U.S. dollars. Some may continue to talk about nonsensical concept of core inflation, but reality of world is a far higher rate of dollar inflation. Given that purchasing power of U.S. dollar, as shown in chart, is declining at about a 5% annual rate and that U.S. is headed into recession, protecting your wealth with Gold is an important act. Gold's price has fallen recently in sympathy with collapse of paper asset markets, providing an excellent chance to buy at a relatively low price. $650 Gold is a bargain relative to a long-term price target of $1,400+.

By Ned W Schmidt CFA, CEBS
Editor of THE VALUE VIEW GOLD REPORT

Copyright © 2007 Ned W. Schmidt - All Rights Reserved

TRADING THOUGHTS is published 45 times per year and distributed by e-mail. An e-mail subscription is $225 per year. Email subscribers to THE VALUE VIEW GOLD REPORT can receive TRADING THOUGHTS as part of a $99 e-mail package subscription to THE VALUE VIEW GOLD REPORT . Fax subscriptions are available for $325 per year.

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To subscribe to these publications go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html This month was the inaugural issue of The Agri-Food Value View , an exploration of how the rise of the Asian economy will benefit agriculture and food investments. To receive a trial subscription, write agrifoodvalueview@earthlink.net

Ned W Schmidt Archive

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