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  • What the Forex Markets Tell Us About Gold and Silver [View article]
    "I don't have an a strong understanding of gold and silver markets..."

    I had hoped that including this admission would earn me some points for modesty rather than make me the target for ridicule, but so be it. As you can see from my other posts, I analyze currencies- not commodities. My interest in gold/silver/etc is not intrinsic, but only inasmuch as it is connected to forex markets. In this case, I was gracious enough to concede that it's possible that commodities are rising for fundamental reasons (granted, I think this is doubtful but I will still allow the possibility); my only point is that the connection to the declining dollar is utterly bunk. For political reasons (which based on the comments above seem to be driving much of the current gold fever), I think people want to believe that gold is rising because the dollar is falling. As I argued in this post, however, I don't see any financial basis for believing that.

    I appreciate the rich feedback that this post received, but given that very little of it addressed the substance of my post, I am now even more inclined to stand by what I wrote.
    May 18, 2011. 12:31 PM | Likes Like |Link to Comment
  • Economic Theory Implies Canadian Dollar Will Fall [View article]
    Indeed, the majority of Canadian exports are of commodities. As I pointed out, however, commodity exports still account for only 15% of Canadian GDP. We can debate whether or not 15% is significant or not, but my view is that it's not enough to drive the Canadian Dollar. Moreover, Canada now imports more than it exports (just like the US!), and this trend is unlikely to reverse regardless of how high commodities prices rise.

    As for your point about inflation, Canadian consumers have to pay market prices for energy. Since it's not subsidized by the government of Canada, these prices will rise when commodities prices rise, irrespective of where the energy comes from.

    Finally, the BOC will almost certainly hike interest rates, but so will every other major Central Bank, which is why I don't think this is a compelling reason to buy the loonie.
    Apr 27, 2011. 02:25 PM | 6 Likes Like |Link to Comment