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
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
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Prime Interest Rates and the Market Value of Gold

Interest-Rates / US Interest Rates Aug 19, 2007 - 12:05 AM GMT

By: Greg_Silberman

Interest-Rates Before the Feds Emergency rate cut on Friday the bias was to higher rates across the board. For example the Australian Reserve Bank increased prime interest rates by 0.25% and even now after the stock market pummeling, continues to warn of more to come. This article explains why interest rates are about to go higher at exactly the WORST possible time.

The question foremost on investors minds is whether a turbulent stock market warrants halting interest rate increases or, in the case of the US, decreasing rates to resuscitate the Real Estate and credit markets.


It never ceases to amaze us that central bankers blame price inflation for increasing interest rates when in fact it is their own money printing that causes price levels to rise. The simple fact is that global printing presses have run too hard for too long for anyone to be able to prevent price levels from breaking out. This leaves jawboning and raising interest rate as the only effective tools in controlling the public perception on inflation. In other words, inflation is now baked in the cake and in the world of central banking (where perception is king) the blame is put on stronger than expected global growth.

Boil it down for us Greg. What does it all mean?

It means we are in for higher interest rates across the entire yield curve at exactly the WORST possible time:

Short Yields:

Australia 1 month Bank Bill prime interest rates
Chart 1 - Australia 1 month Bank Bill prime interest rates

The recent hike in interest rates by the Reserve Bank of Australia caused rates to break above previous support (red line) and painted a target of 8.25% (green line).

Australia has lead the charge on inflation because its economy is so sensitive to underlying commodity price pressures.

Long Yields:

Up until now the treasury market has been the major recipient of a flight to quality. But as chart 2 shows, Bonds are about to hit some headwinds as they approach support in the form of a long-term rising trend line.

Bonds are approaching Long-term support
Chart 2 - Bonds are approaching Long-term support (lower blue line)

The implications of the above chart is that long-term yields are about to reverse higher. There are 2 possible scenarios we could envisage which would cause Bonds to lose their safe haven status:

1 - The strong global growth scenario regains dominance, perceived market risk decreases and inflation has its way.

2 – The credit market contagion spreads into AAA paper and finally into treasuries causing the US Dollar to drop like a stone.

It seems improbable (to us at least) that scenario 1 will play out due to the extent of the credit market problems. Which leaves scenario 2 as our highest probability outcome.

Needless to say, when the perfect storm hits gold and silver prices per ounce will soar!

More commentary and stock picks follow for subscribers…

By Greg Silberman CFA, CA(SA)
Profession: Portfolio Manager and Research Analyst
Company: Ritterband Investment Management LLC
e-Mail: greg@goldandoilstocks.com
Website: blog.goldandoilstocks.com

I am an investor and newsletter writer specializing in Junior Mining and Energy Stocks.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.  

Greg Silberman 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