kitco.com
FB: I think the Fed needs to keep short-term interest rates fairly high in order to maintain a wide spread over other competing currencies, and will help stabilize the U.S. dollar. At the same time, I think the Fed wants to carefully monitor housing prices, allowing them to pull back a bit, but not too far. The key to achieving this is to get the long rate down. So we will see an inverted yield curve, where long-term rates drop, and hopefully the stock market lifts off to another leg to the upside in the bull market.
A few years ago when the stock market was falling, short-term interest rates were cut many times so that essentially we rekindled a bull market in net assets, net household wealth, by driving up the price of real estate. I think what’s happening now, as real estate begins to pull sideways, net household wealth has to stay somewhat buoyant. I think you will see equity prices moving up. To that end we won’t have the big slowdown in consumer spending that would occur if both housing and at the stock market were to fall at the same time.
In my view, this is a coordinated policy by global central banks, and I think we’re coming out of it—we’re in the very last stages of this monetary cycle. We’re heading into a new monetary cycle where we will see more credit creation, more inflation over time, and I think eventually as stock prices firm and as the economy starts to firm, you will see the dollar be allowed to drop to lower levels. That will be bullish for gold.
TGR: So the long-term picture for gold is strong. Yet, you expect gold to perform well in the interim, despite some intermittent sideways movement?
FB: I think that a certain amount of money is just going to continue to pile into gold because ultimately there’s a lot of money out there that understands the unstable nature of things and the fact that gold is essentially the only hedge. To think of gold as a metal in my opinion is a big mistake. |
