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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (9242)	7/14/2004 3:31:35 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Minyanille thread on gold. They posted my reply. From Laurie on Minyanville Gold should be pushing $410++ in my opinion. The recent economic releases and currency movements should have been more positive for gold, certainly more than is currently being displayed, in my opinion. There appears to be some doubt as to the veracity of the current move above $400. The inflation numbers will set the table for the next $10 move. If the inflation releases reflect reality, that inflation is rampant, then we could well be pushing $420 and $7 in silver, in the next week or so. Just thinking out loud and certainly not advice…. I reckon that last sentence could come back and bite me as I have this nasty gut feel that the inflation numbers are somehow going to ok to fair! Buggared if I know how they could be…. but stranger things have happened. Silver had a nice round trip from 6.50 to 6.25 and back again. What was all that about yesterday??? Hearing Producer selling in reasonable size above $6.50 but I am skeptical that it is very significant in the scheme of things. The wait till the inflation data release should keep prices tight for the next 18 hours. ============================================================ Mish Reply posted on Minyanville Mailbag Laurie I sure agree with your bias but I sure disagree with your conclusions written today. If inflation is up huge tomorrow I suspect gold and silver will get hammered and hammered hard, probably more gold than silver. If inflation is up, bonds will sink and with that the US $ will probably rise with rising treasury yields. That is my belief. Gold would likely selloff on a rising US$. OTOH if inflation is weak I expect the Euro to rally and treasuries to rally and the dollar to fall and gold and silver to rise. For the record, I expect tame inflation numbers tomorrow (even if they have to cheat) on the basis of falling grains and stable to falling oil prices. We have to see the combined affects of CPI and PPI to know but I say metals are a buy because the rest of your analysis is wrong! Bet you a quarter on it too. mishedlo Mike Shedlock =========================================================== Reply From Laurie posted to me on the site: Hi Mike, I can see where you are coming from and point well made. It is certainly very possible although I think that gold will move independently from the dollar and bonds, similar to its 12 buck fall with no currency/bond moves last week. Headline inflation rises scare the $hite out of people and they run to gold. Have you ever considered a scenario where bond yields are rising, the dollar falling and gold rising???.... that is something on my radar screens but still a bit away in timeframe..... that will be pretty messy for sure. happy to have a beer on it... im in NYC late Aug so I can buy it for you then! cheers Laurie. ============================================================ My reply back to Laurie: Yes. The scenario you describe couldd happen IMO. The question is "when?". Right now the trend is that gold and silver go up with a falling US$. Yes gold does not always follow that trend, but when it has not that trend has been down. Thus it seems to me that you are looking for a trend change a bit prematurely. The scenario you describe will no doubt be accompanied by a near panic in the stock market as well. A more probable scenario is gold and bonds acting independantly of treasuries. I can envision a "flight to safety" in both gold and treasuries as junk and other debt instruments and equities get crushed. That scenario is more likely than yours IMO. At some point there will be a realization that all these fiat currencies are essentially worthless. Gold wins big in either your scenario or mine but for now the trend will likely remain the same. What do you see as a catalyst for a change? terrorism oil shock collapse in China it just happens Mike Shedlock