Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
SPX/NDX/NAZ Hit New All-time Highs - 27th May 17
GBPUSD Top in Place, GOLD Price Ready to Rocket? - 27th May 17
Silver Mining Stocks Fundamentals - 27th May 17
BBC Newsnight Falls for FAKE POLLS, Opinion Pollsters Illusion for Mainstream Media to Sell - 27th May 17
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold Rising As All Currencies Devalue In Stagflation Environment

Commodities / Gold & Silver Feb 13, 2008 - 02:02 PM GMT

By: Jim_Willie_CB

Commodities Best Financial Markets Analysis ArticleA profound broad gold rally is underway. It is occurring in almost every single major currency. Unsure about Zimbabwe though. In the last article, two major forecasts were made, both hit squarely. The euro fell, heading toward the 143 stated target forecasted. Talk circulates about the Euro Central Bank eventually cutting interest rates. Pressure will grow enormously. The Germans are isolated in wanting a hard line against price inflation. A Latin Bloc has formed, urging a rate cut as the southern nations of France , Italy , Spain , Portugal , and Greece suffer from housing declines. Even Ireland has joined that bloc. A compromise will be worked out, more like a gang-up against the Germans.


In my view, the 143 target is still on the board, as the euro 20-week moving average serves as a few logs on the roadway. In time, a cleared path down a little more. Much of the euro rise has been predicated in the last year or more upon continued rate hikes. Not only will they not happen, but rate cuts will be more the norm. The Competing Currency War ensures it. The US Federal Reserve has exported its monetary ease policy. Foreign currencies simply cannot fight it.

A twist has occurred in addition. The US Dollar enjoyed a bounce, jumped up from the vigorously defended dangerous 75 level, touched 77 at the 20-week moving average, only to be rebuffed. That US $ bounce was the second forecast. Look for a rally toward 78 after the euro comes down a bit more. The key is the Euro Central Bank. Incredibly, pressures are growing which might actually pull apart the European Monetary Union. To preserve the union, the ECB will cut rates, although much much much more slowly than the openly utterly desperate Americans.

The United States is the source of the banking implosion, the source of the mortgage bond destruction, the source of the bond insurer disintegration, the source of the risk model meltdown, the site of the credit derivative pyramid topple, the source of the urgent interest rate cuts. WHAT A MISERABLE FAILURE THE US BANKER CUSTODIAN PERFORMANCE HAS BEEN FOR TWO DECADES!!! The US Fed will cut rates down below 2%, perhaps even to 1%, in total desperation. The tragedy is that the lower rates will not stop the banking wreckage, will not stop the US Economic recession, will not stop the housing crash, will not stop the credit derivative meltdown, but will ensure the eventual US Dollar demise.

GOLD RALLY IN EUROS

The effect of a euro in retreat, but a gold price hovering over 900, is a nice gold rally in euro terms. This effect is not fully visible to Americans, who tend to think 90% about US factors, and 10% about multi-national firms, and do not speak foreign languages. Yet they consider themselves superior to the swarthy foreigners who are bilingual and even multi-lingual, as well as being better educated in mathematics and science.

The gold price is rallying in euros, which is tremendous news for the global gold rally. Gold is also rallying hard in swiss franc terms, a strong confirmation for gold. Given the importance of banking supremacy returning to Europe , to Switzerland in particular, the new foundation of the gold rally rests in Europe . So a gold rally in euro and swissy terms is of ultimate importance. The greater accommodation given by the Euro Central Bank will provide a strong continued lift to gold on the old continent.

YEN TO SOFTEN, GOOD FOR GOLD

The Japanese yen has put in an intermediate top. Rather than to show the gold chart in yen currency terms, observe the yen chart. The gold-yen chart looks much like the gold-euro chart, a rising bull. The importance of the yen is incalculable for to sustain the global liquidity movement in favor of continued speculation. It was no coincidence that the US stock market suffered hefty declines while the yen currency rose from 87.5 to 94 in the past two months. Speculative money, heck basic investment money, was drained from the system. That phenomenon gained attention. The Yen Carry Trade, whose principal beneficiary is the Bank of Japan itself, will continue. Even though the BOJ has a lunatic 0.5% official rate, it could be lowered! There is no way the US Fed descends to the shameful 1% or 2% rate level without the Japanese obediently heading toward 0% themselves, maybe not actually zero but closer to zero. The yen is soon to fall toward the 90-91 range, giving more support for the beleaguered US Dollar As the BOJ cuts rates, as the yen comes down a little, it encourages the gold bull market in their corner of the world.

AUSSIES SHOOT THEMSELVES IN FOOT

Last week, the Reserve Bank of Australia (RBA) actually hiked their official interest rate by 25 basis points. Rather than show the gold chart in aussie currency terms, observe the aussie$ chart. The gold-aussie chart looks much like the gold-euro chart, a rising bull. At 7%, they invite a carry trade to invest in the Aussie Dollar with money borrowed from the low US rate. This is just theory, hard to put into practice, and here is why. Many reasons apply. The US has not finished lowering interest rates. Going short the US Treasury when rate cuts continue would be risky. The 2-year US T-Bill yield is more stable, but it should descend under 2% with more vigor before long, as the US Economy shows unmistakable recession evidence. Lower bond yield means higher principal value, and damage to shorts.

Also, the Australians do not have a huge robust bond market. Inadequate liquidity obstructs any serious effort to institute or encourage a carry trade. The Aussie's responded to price inflation, while putting their conventional economy and housing market at great risk. The Aussie Dollar will come down. It registered a double top. Their central bank will remove that rate hike within a couple months. It was a kooky maneuver. The great commodity bull market cannot be halted by Aussie rate hikes. Live with it, by holding back on monetary growth. As the RBA cuts rates in response to a declining housing market and thus economic falter, the aussie$ will come down a little. That will encourage the gold bull market in their corner of the world.

INFLATION DRIVES GOLD & SILVER

The main driver for the precious metals has shifted to inflation. The chief lever is not the US Dollar anymore, as hidebound dolts miss the point and the enlightened see the shift. Put aside the nutty definition by the clowns of Wall Street and agencies of the US Govt. Prices are not the key, but rather supply of US$ funds flooding the global system. From 2003 to 2006, we had an inverted US Treasury yield curve. That clearly indicated the economic recession we find ourselves in now. So-called economists, more like carnival barkers and whores in three piece suits, called it a conundrum. The signaled recession is here.

Next the steepened US Treasury yield curve is screaming about inflation. The yield spread went from zero at the beginning of year 2007 to around 180 basis points now. Combine the successful previous signal with the current signal are you arrive at a loud STAGFLATION situation. This is not complicated. In order to foment confusion, Wall Street prefers to complicate things. Nothing confusing about the ratio chart shown, of the 10-year yield ratio versus the 2-year yield. Its relative strength is almost off the chart, hovering at 90 in an occurrence rarely seen in any chart. It confirms the money growth enforced globally, and provides a strong signal for the gold price. All central banks will soon be cutting official interest rates.

GLOBAL ENERGY WAR

Meanwhile, more grenades on the oil front, as weakened strongman Hugo Chavez is embroiled in an international court battle with Exxon Mobil. Did Hugo expect the oil giant to take it lying down? They have lawyers on the payroll. A multi-billion confiscation usually invites a reaction. Ironically, if Hugo cuts off the US on oil or gasoline or diesel shipments, he might not be able to adequate replace such ongoing contracts with Chinese contracts so quickly. Maybe the Venezuelan people can follow up their refusal to permit his dictatorship to become an institution, with some measure that leads to his removal from office. Not likely, but if major revenue is cut off, tens of thousands of demonstrators led by students might take to the Caracas streets. The prospect of New York courts making decisions with national appropriation in the background somehow seems laughable. What is the legal precedent for retaliation after seizure theft by a state corporation? Crazy times. Just another factor to keep the crude oil price chronically high. Besides, if the New York court acts in strong terms, it might set a precedent for action against US rogue financial firms engaged in fraud and home seizures!

EDITOR NOTE: Strange times in Costa Rica . No article last week. They have a strange custom here, closing the bus door in the face of gringos. This time, my reaction was to catch it with my left hand. Dumb move. The door closed on my wrist, like 150 lb weight. After some confusion, the driver opened the door. Fingers did not function for a few days, numb fingertips. Next time my shoe, not my hand. A learning process, maybe take more cheap taxis. Still a ‘plebe' at heart.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

“Your financial commentaries are extremely insightful and have saved me a ton of money. The subscription has more than paid for itself. This should be an interesting year to say the least!” (RickF in Texas )

“The unfortunate demise of Dr. Kurt Richebacher leaves Jim Willie, Bob Chapman, and Jim Sinclair as the finest financial minds on the scene today.” (DougR in Nevada )

“There are four writers that I MUST READ. You are absolutely one of those favorites!! William Buckler, Ty Andros, Richard Russell, and YOU!!” (BettyS in Missouri )

“Your newsletter caught my attention when the Richebächer report ended. Yours has more depth and is broader in coverage for the difficult topics of relevance today. You pick up where he left off, and take it one level deeper, a tribute.” (JoeS in New York )

By Jim Willie CB
Editor of the “HAT TRICK LETTER”
www.GoldenJackass.com
www.GoldenJackass.com/subscribe.html

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe.

Jim Willie CB is a statistical analyst in marketing research and retaicl forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com

Jim Willie CB Archive

© 2005-2016 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

Catching a Falling Financial Knife