Gigem77

Where Are Precious Metals Heading?

CLH, let me put another scenario on the table. The Euro, yen and dollar are all paper and they are all falling against commodities. One piece of paper can look better against the others on the way down, but the direction is clear. Gold is not moving contrary to just one of these fiat currencies. Gold is moving higher against them all. So is oil for that matter, or sugar or copper.

The DXY is still weak, still below the 200 day simple moving average and that's compared to other weak currencies.

Paulson is going to have to buy assets from fannie and freddie. The FDIC is going to need more money. They just took over 2 more banks this weekend. There are over 90 more banks that they admit are in trouble. Since they failed to see Indymac "troubled", how many are there really?

The dollar is going to fall against gold, even if it rises against yen or euros. Nothing fundamental about the dollar has improved. The trade, treasury and current account deficits are all getting worse. Can the world continue to loan the U.S. ever increasing amounts of money? Will they?

Where Are Precious Metals Heading?

Eurosystem banks are selling 500 tonnes of gold per year. India has cut purchases by 55%. Yet the price is over 900 bucks an ounce still today. Gold is up 43 dollars in the last 30 days despite the sell off and it's up 254 dollars year over year. Perhaps the smart money is hedging their inflation risk. There seems to be quite a bit of inflation coming down the 'pike now. Investment demand for gold dwarfs the jewelry demand.

Interest Rates and the Mineral Bubble: The Hidden Parameter

The fed has been decreasing interest rates for some time. So your first premise is wrong. Bernanke has cut rates 3 full percentage points. Commodities have risen in price throughout the period of those cuts. But Greenspan raised rates 14 times between 2004 and 2006 and commodities rose in price during that time frame also. Go back and do your research again.

Name a miner that is "hoarding reserves". Copper is nearing $4.00 per pound and every miner with a pick and shovel is digging as fast and as hard as they can. High prices are a strong motivation to over produce, not hoard.

Crude oil prices soared because demand grew to nearly equal production. Chinese consumption of oil is growing 7.5% per year. The lack of spare production capacity is the key to understanding higher prices.