SD
You wrote:
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The best environment for gold price should be high money supply and low interest rates (low real interest rates).
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I wrote:
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Increasing higher long term interest rates = increasingly
higher long term gold prices ....
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One of us is foolish and it ain't you.
I have read the following many times and it is the best
work I have ever found on the subject.
As to my post - lets call it a brain-fart. In any event,
you will find that this work almost to a T supports
your post:
It is a long piece and here are some highlights:
By John P. Hussman, Ph.D.
Excerpted from the October 1999 issue of Hussman Econometrics
All rights reserved and actively enforced.
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Hands down, the main factor that moves the dollar is not the action of inflation itself, but the action of long-term real interest rates (long term interest rates minus long term inflation expectations, which can be very roughly proxied by the current inflation rate, since inflation is "serially correlated").
When long-term real interest rates are trending down (relative to long-term real interest rates in other countries), the dollar typically declines.
When long-term real interest rates are trending up, the dollar typically rallies.
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So if we're looking for a rally in gold, we're really looking for
1) World inflation, particularly in the U.S., and
2) falling long term Treasury bond yields.
This combination is most frequently seen early in a recession.
Remember, unless demand is actually falling, slower economic growth is correlated with faster inflation.
That means that inflation is generally rising at the time the economy enters a recession. At the same time, it turns out that long term interest rates stagnate or fall as the economy enters a recession.
The net result is that as the economy softens, long-term real interest rates tend to decline, and the value of the dollar typically plunges.
That's the time you want to own gold.
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hussmanfunds.com
Ah - I have to go to the blackboard now and write 1000 times
I shall not post unless I am thinking.
regards,
John McCarthy |
