Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

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.


© 2005-2019 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

6 Critical Money Making Rules