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

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To: John McCarthy who wrote (16818)	7/23/2006 8:31:01 PM
From: SwampDogg	Read Replies (1) of 78409

It would seem that higher rates and higher gold prices occur at the same time because they are both a side effect of inflation (growth in money supply). The best environment for gold price should be high money supply and low interest rates (low real interest rates). Therefore I would tend to disagree with the notion that higher rates or a shrinking of money supply is bullish for gold. The fact that they have happened at the same time should not automatically lead one to the conclusion that one is good for the other. The fundamental bullish case for gold is that inflation is growing and the Fed may have no choice but to increase liquidity due to the debt picture and politics. The fact that gold has risen over the past 2 years in a rising rate environment is also bullish longer term (ie gold would be higher now if rates were not going up. Gold does best looking forward when real rates are at their lowest. If inflation falls in the next year and rates stay where they are gold will probably go lower.

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