Driver of Gold and Silver prices

Here is my latest silver addition. Or should I say Silver protector!

When the sh** hits the fan and folks start trying to break down the doors, look out cuz I am gonna get you!

 

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Perhaps either, perhaps neither. Signals that work under free market conditions could easily turn out to be meaningless when the Fed is actively attempting to control the entire yield curve.

 

Sun Tzu said the acme of war was a bloodless victory. Ain't lettin' nobody score no stinkin' "Acme" on me !
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Will you be ready for the End of America?


Read more: http://www.cointalk.com/showthread.php?t=154086&page=3#ixzz1DLjwRuky​

It won't be the end of America. It will be the end of the USD as the world's reserve currency however. That will be plenty ugly indeed but the U.S. of A. will survive that issue at least. I give the USD 10 years maximum life expectency, but my guess is 6 to 8 years or our next recession, whichever comes first.

 

Several posts are getting off subject as to Drivers of Gold and Silver Prices. It is OK to list political upheavals, USD difficulties, interest rates, etc. but not personal opinions of doom and gloom. Lets get back to the original question.

Thanks
Jim

 

It looks like metals got a nice push today thanks to the Chinese interest rate hike. Typically one would think this would cause metals to drop since raising interest rates is most often associated with a stronger economy not in need of the low rates, but in this case the reason seems to be inflationary concerns which indicates the opposite. Chalk up another point for fear as a driver.

http://www.thebulliondesk.com/news/?id=29287&v=0&lang=en&cid=132231&type=1

 

I have been closely watching the bond market for a while as they are tied to mortgage rates I am tending to agree that inflation is starting to show its ugly little head which would be a driver for the PM market to go up as it has over the last week.

 

A couple of thoughts...

Interest rates might rise because of (1) a strengthening economy, (2) fear of inflation, (3) the Fed's attempt to manage currency flows, or (4) rising expectation of default.

Gold tends to rise when real [inflation adjusted] interest rates go down. So gold might drop as rates rise if (1) inflation expectations exceed the rise in ratesj, or (2) the rise in rates is connected to an increased expectation of default, making gold a safe haven. And gold might drop as rates fall if (1) the market expects deflation, (2) gold is sold to buy long term bonds for capital appreciation.

So changes in interest rates and gold prices tell you nothing about what is in the mind of the folks doing the buying and selling. Keep that in mind the next time you read an article associating a rise/fall in gold with a rise/fall in interest rates. It isn't easy to figure out what the market knows or why it does what it does. There are more opinions than facts out there.

 

Thanks for posting a link to the article. As you may recall, the first rate increase that China took a few weeks ago was followed by a pullback in gold (as one would expect under a non-inflationary environment). I guess the tide of public sentiment is turning a bit as people feel that inflation is one step ahead of their central bank, here's a quote from the article:

"There's the impression that the Asian central banks are chasing inflation instead of being ahead of it."

This is exactly my take on where our central bank is. Bernanke is not inept he just has to choose between the lesser of two evils. Tighten fiscal policy and crush our fragile recovery OR perpetuate loose fiscal policy and find some way to deal with the consequences later. For every 1% increase in the bond yield there is something like an additional $140 billion in interest owed on the debt. We may not want to deal with our debt problem but the bond market may force the issue.

By the way Bernanke testifies before the House tomorrow. Should be interesting but my prediction is he will not budge on rates, CPI or his QE programs. Bad for our future, good for precious metals.

 

It looks like your prediction was correct. In reading the link below there seems to be another driver previously unconsidered (to me at least), which is that we are about to hit our debt ceiling.

http://www.aolnews.com/2011/02/09/when-do-inflation-debt-become-bigger-worries-than-jobs/