Tuesday, December 11, 2007

Got Gold?

Nuclear Bond Implosion Ahead

The US Fed's measure for long term inflationary expectations may keep it from dropping rates much further, potentially setting off a 'nuclear' bond-price implosion.

Posted by sold 2 rent 1 @ 12:37 PM (3085 views)
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5 thoughts on “Got Gold?

  • sold 2 rent 1 says:

    “The lower the Fed will drop its short term rates, the higher the longer term rates will go – and that will stop longer term lending in its tracks.”

    “Since the whole financial world rides on debt, the level of which is inexorably connected to interest rates, any dramatic rise in rates will cause debt – and therefore money – to implode right alongside it.”

    We may yet see further corrections in gold. But when she blows, the tremors will be felt around the world.

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  • interesting couple of article on gold in the weekend FT. One was a technical outlook (Gold’s actually stuck in a range at the moment – I expect it will drop to the bottom of that range and fall through which will then be the time to buy [having said that its chart pattern is bullish]) so i dont agree to have the stop at $780 where he says). After that im bullish too.

    2nd one talks about a gold fund that will give 140% of the increase in the price with some downside protection. – I’ve not looked at the terms of this but it sounds ok. the titles are : “Going for gold begins to look like a bright move” AND “GOLD GETS THE NOD” just do a search for these in the main FT site/

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  • To be honest I dont understand what this is article is saying. It might be saying what I believe which is when people lose all faith in the $, money and commodities then gold will rocket. At the moment the Fed is trying to hyper-inflate to prevent a recession. If they succeed gold goes up a bit, but stays trapped in a range dictated by the weakness of the $. If they fail gold goes up a lot $2000, $3000, $5000 an ounce you name it…

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  • sold 2 rent 1 says:

    happyrenterz,

    The article is saying that cutting short term IRs pushes up long term (mortgage) IRs because the market expects inflation.
    Mortgage rates are staying high no matter what they do. The housing market is doomed.

    The USD’s continued weakness against the EUR will come to an end because the EUR is just another rotten fiat currency too.
    In an inflationary environment, gold will take off much more than the dollar can decline.

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  • Let’s think this through carefully. If the central banks drop rates, the markets expect this to cause inflation. Buyers of bonds become picky, thereby causing long-term bond yields to increase significantly. This increase makes up for the expected inflation. If the central banks drop rates even further and/or helicopter Ben starts living up to his name, then the long-term bond market could seize up just like the interbank market, the commercial paper market, etc. All those big buyers will start looking at alternative inflation-proof investments instead. Gold is one option; shares and property are another. Shares and property have the advantage of dividends and rent, whereas gold doesn’t. Could asset prices rise yet further??!!

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