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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers -- Ignore unavailable to you. Want to Upgrade?

To: John McCarthy who wrote (16822)	7/23/2006 11:32:58 PM
From: SwampDogg	Respond to of 78409

Good post I have seen a couple of articles in the past month or so that has seemed to imply that higher rates will be the very cause of higher gold prices. They may happen together but these articles are false in trying to prove a link. Hussman is a must read every week.

To: John McCarthy who wrote (16822)	7/24/2006 12:18:50 AM
From: loantech	Read Replies (1) \| Respond to of 78409

This guys says different. I go with what he says: History - The Great Teacher! Puru Saxena 18 July, 2006 THE BIG PICTURE - We are now living in an inflationary war cycle. Over the coming decade, I expect massive inflation (money-supply growth) and worsening geo-political conflicts. During such a hostile environment, commodities (especially gold and silver) are likely to outperform every other asset-class. At present, there is a lot of noise about a commodities "bubble". The majority of "experts" are convinced that commodity prices have risen too much and they'll collapse. On the other hand, stocks and bonds are being touted as bargains; the foolproof road to riches and financial freedom! These days, the mainstream media is awash with analysts who are claiming that commodities will suffer due to rising interest-rates. Frankly, I find their argument totally absurd. History has shown that commodity prices are positively correlated to the direction of interest-rates. On the contrary, financial assets such as stocks and bonds are negatively correlated to interest-rates! Figure 1 shows the long-term trend in US interest-rates and its effect on various asset-classes. During the 1970's, interest-rates soared and this period coincided with a gigantic bull-market in commodities. Despite sky-high interest-rates, all the commodities went up several-fold! It is interesting to note that the 1970's saw a vicious bear-market in stocks and bonds. Back then, the US underwent a huge recession and Britain had to be bailed out by the IMF. Interest-rates peaked in the early 1980's and this coincided with the end of the commodities boom. In the following 2 decades, both interest-rates and commodities declined whilst stocks and bonds witnessed a huge boom. Figure 1: Impact of interest-rates on various assets Figure 1 leaves no doubt that the previous commodities boom took place amidst rising interest-rates and a severe recession. So, next time when the "experts" claim that commodities are about to collapse because of rising interest-rates and a slowing economy, perhaps you can direct them to a good history teacher! 321gold.com