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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: sea_urchin who wrote (20307)3/2/2004 6:48:57 PM
From: The Vet  Read Replies (1) of 81913
 
Searle your statement "It goes without saying that a fall in interest rates in the presence of a strengthening dollar is a very positive sign --- and very bad for gold." puzzles me.

I always believed that low interest rates were positive for gold because the relative carrying cost of gold (which pays no interest, or very little) was higher than bonds and T-bills etc. in a high interest environment. As the interest rate of those instruments drop their advantage (measured as the return on capital invested) diminishes.

A strengthening dollar tends to be gold unfriendly in USD terms only because gold is denominated in dollars. The strengthening dollar actually is positive for the gold price in all other currencies that must logically fall as the dollar rises.

There is a great tendency to confuse readers as to cause and effect in these areas simply because there is no fixed base measurement which can be used to judge what is up and what is down. All is relative dependant on the viewpoint of the observer.....
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