The precious metals have established an inverse relationship to the vitality of the $US. As the Federal Reserve continues weakening the attractiveness of our currency,(as a function of reducing the interest-rate paid overnight to a reserve-note holder), gold and silver will strengthen. The yield on longer-term notes and bonds, will climb, as they must; indeed, a weakening dollar increases the risk of ownership to the holder. Therefore, the longer the term of holding, the greater risk to the holder, and thus, the higher rate of interest demanded as compensation in light of a weakening dollar.
Those who have purchased long-bonds in recent months have done so for as an emotional response, a "flight-to-quality," and not predicated on sound financial judgement. Soon, these very same individuals will flee to the shortest of maturities, as they begin to loose principal. They will also move to the p. metals, as the remaining haven for safety.
Expect the $US to continue its fall and the metals to move quickly next week. Watch the Deutschemark and Yen. At 1.50 D-Marks, and 110 Yen, gold will approach new highs.
T.V.H. |
