I was stopped out of kgc already. Oh well. Maybe I will come back in a few days we will see. When they stop you out the same day you buy you have to leave the sector for a couple of days that is one of my rules
rebellion-"What I cant figure out, is who pays for these because they are sure-loss trades if they lean against the wind which is their purpose."
There are a lot of rumors swirling around the online gold community saying that the fed has taken over JP Morgan's hedge book. If true, this would explain a lot of things.
Regarding this mornings' gold price action, I have another theory. Let's say a lot of very big hedge funds want to get into gold stocks. They conspire to sell paper gold together, right before the market opens. This causes gold stocks to gap down on the open.
The hedge funds then by gold stocks cheaply, while at the same time they close out their gold shorts. They break even on the gold short, or perhaps make a few bucks, and they are well positioned in gold/silver stocks. WTZ, for example, opened about 3% down and ended the day up 4%. IMHO, pipe
I agree with you both - about the inflation being a monetary expansion as opposed the public's perception that inflation is a measurment of prices. There is a large shock absorber in between these things that government and business use together for whatever purpose. These fundamentals however have been in place since 1997 and have less effect on the price of gold than confidence in the US$ has on it. So little tricks like that parabolic rise in the USDX at 9am this morning, and sharp reversals in oil & stock indices are likely the derivitives in between the money supply and the prices we pay for stuff. What I cant figure out, is who pays for these because they are sure-loss trades if they lean against the wind which is their purpose.
Anyway, it looks like a good day for pms other than GFI, IMG, and our host rgld. Even gold went up a little despite the USDX saluting the fed governors' perception tour today, it's up in all currencies for once.
"capt."printing money is the very definition of inflation."
Well, the effect might well be the same, however technically printing money alone has no effect on prices as long as the ratio of goods and currency remains the same. Unfortunately in real terms, prices are inflating at a much faster rate than GNP. This would account for the decline in the worth of the U.S. dollar. Eventually the devaluation of the currency and the reduction in disposable income will create additional negative pressures on economic growth. This scenario has the unpleasant possibility of snowballing into a crisis that will tend to play itself out before it can be contained.
capt."printing money is the very definition of inflation."
Exactly. That's why I'm so bullish on gold. I don't care what their phoney inflation price indexes say. They are creating new dollars and dollar substitutes, like fannie mae receivables, at a blistering pace.
And at the first sign of any economic trouble, they unhook the governor on the printing press engine and let 'er run wide open. IMHO, pipe
"we are so deeply in debt, we can't afford higher interest rates. So let's say rates start to inch higher, and economy goes into a recession."
Higher rates will not impact everyone equally. Actually higher rates will benefit the government and the wealthy, the same constituency that has benefited from this administration's fiscal policies over the last four years, but would be harmful to the middle and working classes. Indications are that the fall in the dollar has failed to correct the global imbalances that threaten growth and that much higher interest rates will be necessary to stabilize the monetary system. The Fed has already begun to signal that rates will rise at a more than measured rate.
While Inflation reduces the real cost of debt repayment, the accompanying price increases will simultaneously create greater hardship for the middle and working class, but the party in power has shown little interest in protecting average American's well-being up to now.
Also I sometimes I wonder if the Fed could lose control and have a crisis spin out of control. Have we been too complacent assuming an omnipotent Fed is really able to "fix" any and all eventualities? I wonder.
Bogfit-"[printing too many dollars]will also degrade the value of the dollar making higher interest rates necessary to attract foreign reinvestment."
I couldn't agree more. But we are so deeply in debt, we can't afford higher interest rates. So let's say rates start to inch higher, and economy goes into a recession.
I'm guessing that the fed already has one finger on the panic button. Any hint of a slowdown in the economy and they will be buying bonds to force down long rates as fast as they can't print up spare fiat in the back room.
Nobody agrees with me on this, so it's kind of lonely defending this position. But here we are, three years into an economic recovery, and long rates are near historic lows. pipe
"... people predict a 5%+ ten year in the coming year. But guys like Ben Bernanke and Alan Greenspan can print unlimited amounts of dollars to use for bond prchases."
Not only will the printing of dollars cause the classical definition of more dollars chasing the same amount of goods, but will also degrade the value of the dollar making higher interest rates necessary to attract foreign reinvestment. I'd say a 5% 10yr. is quite likely, maybe even higher.
capt.-"i was speaking about his trade deficit comment. Gross predicts 5%+ ten year in 05.Treasureies artificially high due to asian intervention."
Gross and a lot of other people predict a 5%+ ten year in the coming year. But guys like Ben Bernanke and Alan Greenspan can print unlimited amounts of dollars to use for bond prchases. In fact, Ben Bernanke said that inflation would not happen on his watch. Not "might not happen", but rather "will not happen".
It is my belief that the fed will push long rates LOWER, by what ever means necessary. This is megabullish for gold, if I'm correct.
Got gold? pipe