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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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From: Whitmore G.	10/19/2008 12:31:46 AM
	of 78417

Dow may touch lower 7k in next few weeks. Also, I think the US dollar will finally start to trade down when the US moves with it's even more aggressive rate cut later this month, if not before then. Gold will strengthen from here. Currencythoughts.com says dollar move up is based on forced liquidations of hedge funds who are closing their books for their year end and not on capital flows which are negative for the US dollar and getting more so. Also deflation ,the likely future now, is bullish for gold just as the recent inflation was. The strength in the US dollar is also not justified by European manufacturing growth being lower then the US. The opposite in fact is the case. Gold would continue to suffer if price stability is maintained but that would entail disinflation and continued slow price growth which is highly unlikely given the down force coming from the current house price cavitation. The price of gold performed well in the thirties deflationary market. It will again in the coming and current deflationary environment. The instability likely to come from failure of Lehman swap payments to settle, due in coming week,Tuesday, from those under writers on the hook for it and the auctioning of us dollars in Europe as a part of their bank rescue package will also weigh heavily on the US dollar the principle of which, let us not forget, is the source of all this mess. Early today, Euroland reported a downward revision of its September PMI-manufacturing index to 45.0 from a preliminary estimate of 45.3 and an August reading of 47.6. In the United States, the Institute of Supply Management just announced a much bigger 6.4 plunge in the U.S. PMI-mf’g index to 43.5. Consequently, the straight algebraic differential (U.S. minus Euroland) between the two trends crossed back into negative territory following three positive readings in a row. The spread had also been negative during the first five months of 2008. One cited factor for the drop in EUR/USD after peaking in mid-July at $1.6038 had been perceptions that the Euroland economy will continue to perform more weakly than the U.S. economy. These reports cast doubt on that assumption and on the further inference that the differential between the Fed’s and ECB’s benchmark policy interest rates will become more advantageous to dollar investments in the future currencythoughts.com Edit/Delete Message

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