I need someone to explain something to me. We saw early on that durable goods orders came in worse than expected and later, consumer confidence came in much worse than expected.
All the negative data that came out today and the dollar and treasuries are green? How? This shows you what investors perception is of the U.S. dollar and Treasuries as a safe haven at present, not just here but abroad. I have written about the issues in Europe and Japan and how this will be dollar bullish which should put pressure on gold/silver.
There are some out there, and as you know I have been calling for lower rates, that are saying the Fed could take rates negative. The Fed’s next move? Negative interest rates – Yes, a proactive Fed would do something so drastic to get money velocity moving (people spending and money moving in the economy). But I think it would have a negative effect. I think people would hoard their wealth even more. In deflation, people hoard. In inflation people spend. The Fed needs people to spend to make their system work. That’s why in Bernanke’s 2002 deflation speech talking about how deflation won’t happen here gives us tremendous insight into what the Fed could do if necessary; drop money from helicopters. But even then they can’t get people to spend it!
How many of you think the Fed is in control? How many of you thought the Fed was in control before the last crisis?
Gold is the insurance against the inevitable. How you define the inevitable may be different than me, but we all know one thing, it’s inevitable.
For now though, the dollar rising will put pressure on gold and silver which treaded water today while the mining shares suffered. On this Fed week of volatility the mining shares did mount a comeback but then faltered. The overall market continued south on the bad economic data. I wouldn’t be surprised to see it up tomorrow though in this bizarro world. In essence, investors view even more certain now the Fed won’t raise rates with such bad data and higher for the market we go. Just watch. But of course that will depend on the results of the engine that could; Apple, who reports earnings tonight. It used to be as GM goes, so goes the nation. GM and the nation went to hell in 2009 and now all our hopes and dreams are with Apple? Stay tuned.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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