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Gold/Mining/Energy : Gold Price Monitor
GDXJ 109.28+3.8%Nov 28 4:00 PM EST
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To: Rarebird who wrote (49671)2/26/2000 4:57:00 PM
From: Gord Bolton  Read Replies (1) of 116790
 
A decline in the U.S. stock markets will lead to a decline in the U.S. Dollar IMHO because the demand for the U.S. dollar has largely been to use the U.S. dollars to invest in the U.S. stock market.

The U.S. dollar would not otherwise be at it's current level given the U.S. balance of trade deficit. Overseas recipients of U.S. dollars are not demanding goods in return, they are investing their U.S. dollars in the U.S. stock bubble.

The revival of other economies will lead to an increase in demand for commodities and higher prices which will lead to more inflation in the U.S. as well as an increasing balance of trade deficit.

Many of the high flyers in the U.S. stock market are due for correction. They do not produce products which increase productivity or in many cases even lead to profitability for the shareholders. In many cases they are simply nifty. You cannot buy a barrel of oil with nifty and you cannot eat nifty.

The U.S. stock market and economy have been stimulated on cheap commodity prices and over exuberant belief in ever rising local stock prices.

And the U.S. economy and stock market was deliberately overheated to offset currency crisis and economic problems elsewhere in recent years. The question is; Will this become a permanent and self perpetuating state of affairs or will the rest of the world ever benefit and enjoy economic growth independant of U.S dollar investments.

If the rest of the world does thrive, there will be increasing demand for other currencies and commodities and the U.S. dollar will decline in value relative to other currencies, commodities and gold.
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