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Strategies & Market Trends : Fidelity Select Sector funds
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To: Harold who wrote (3907)9/7/2001 11:01:53 PM
From: Julius Wong  Read Replies (1) of 4916
 
Harold:

In general, gold price is likely to move up if US dollar drops.

For a long time I thought the US dollar will become weaker, but I had neglected to compare the strength of the pro-dollar and the anti-gold forces in my analysis. A more complete analysis should compare the pro-dollar and the anti-gold forces, with the pro-gold forces.

The current US policy is for a strong US dollar. The other pro-dollar forces include the European countries (a strong dollar helps their export business), Japan (also for better export business), China (Chinese money is pegged to US dollar), OPEC countries (oil is traded in US dollars). The Europe, Japan, China, and OPEC collectively have more US dollars in their hands then the US dollars currently circulating in US.

The anti-gold forces include the Central Banks and the traders. The CBs are selling gold. Whenever the gold price moved up a little, the CBs lowered the gold loan rates to encourage the traders to sell or short gold.

The pro-gold forces are mainly the gold bugs.

The pro-dollar and anti-gold forces are much stronger than the gold bugs.

I think gold is very undervalued, but it's not likely to move up in the near term because the pro-dollar and anti-gold forces are too strong.

Just my opinion.

Julius
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