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Strategies & Market Trends : The Swamp -- Ignore unavailable to you. Want to Upgrade?

To: SwampDogg who wrote (319)	8/7/2008 8:36:12 AM
From: rubbersoul	Respond to of 491

Not cutting interest rates is the "new cut" in an inflationary environment, IMO. People will figure that out and gold will continue in its safe haven role. Korea raised rates yesterday. The ECB keeps it flat today: ECB Leaves Interest Rates at Seven-Year High to Fight Inflation By Christian Vits Aug. 7 (Bloomberg) -- The European Central Bank kept interest rates at a seven-year high to fight inflation even as evidence of an economic slump mounts. ECB policy makers meeting in Frankfurt left the benchmark lending rate at 4.25 percent, as predicted by all 60 economists in a Bloomberg News survey. The bank, which raised rates last month, will wait until the second quarter of next year to cut borrowing costs, a separate survey shows. The ECB is concerned that the fastest inflation in 16 years will help unions push through demands for higher wages and prompt companies to lift prices. At the same time, record energy costs and the stronger euro are strangling growth. Economic confidence dropped the most since the Sept. 11 terrorist attacks in July and Europe's manufacturing and service industries contracted for a second month. ``The ECB will keep all options open as uncertainty about the economic outlook has risen,'' said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. ``However, they have a bias toward hiking rates. Their main concern is still inflation.'' ECB President Jean-Claude Trichet will hold a press conference 2:30 p.m. to explain today's decision. The Bank of England kept its key rate at 5 percent, while the Czech central bank cut its rate by a quarter point to 3.5 percent. Faster Inflation Inflation in the 15-nation euro region accelerated to 4.1 percent in July as oil prices soared to a record. The ECB aims to keep the rate just below 2 percent, something it has failed to do every year since 1999. The bank raised its benchmark rate by a quarter point on July 3, citing its concern that a wage-price spiral may develop. Negotiated wages in Germany, Europe's largest economy, jumped 3.5 percent in the year through April, the biggest gain in 12 years. In Italy, wage inflation accelerated to 3.6 percent in June. ``Our biggest concern is the inflation level,'' ECB council member Klaus Liebscher said in an interview published on July 25. ``We haven't exhausted our room for maneuver'' on interest rates. Still, Eonia forward contracts show investors scaled back bets on higher ECB rates after a slew of data showed the economy may have contracted in the second quarter. The yield on the March contract was 4.31 percent today, down from 4.61 percent two weeks ago. Slower Growth Euro-region retail sales fell for a second month in July and German factory orders unexpectedly dropped for a seventh month in June, driven by a slump in exports. Oil prices have retreated 18 percent since reaching a record $147.27 a barrel on July 11 and money-supply growth, which the ECB uses as a gauge of future inflation, slowed more than economists forecast in June. ``Slowly but surely, the arguments for another interest-rate hike are running out,'' said David Milleker, chief economist at Union Investment GmbH in Frankfurt. ``The focus will shift more and more to the economic slowdown.'' The ECB in June forecast euro-region economic expansion of about 1.8 percent this year and 1.5 percent in 2009. After raising rates last month, Trichet said the bank still expects ``moderate, ongoing growth.'' ``A lot has happened since the ECB hiked its policy rate at the July meeting,'' David Mackie, chief European economist at JPMorgan Chase & Co. in London, said in a research note. ``But it is too soon to expect a dramatic shift in rhetoric. While we are sympathetic to the idea that the ECB could ease next year, it is likely to be a slow journey.'' To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net Last Updated: August 7, 2008 07:45 EDT

To: SwampDogg who wrote (319)	8/7/2008 8:36:25 AM
From: ItsAllCyclical	Read Replies (1) \| Respond to of 491

>> Gold is in a bull market and that is all that I concern myself with. << Many investors thought the same when gold cleared $1,000 for the first time. They bought juniors and held. I was guilty as well, but I learned. Those that say that gold is in a bull market and don't concern themselves w/much more are generally heavy underwater at this pt. I'm not doubting the LT bull in gold. I'm merely saying after 8 years a longer/deeper break (or even an average break ala 2006) is the most likely scenario especially w/the other factors I've outlined. >> FWIW if the world went into a bigger slowdown monetary policy would become looser and real interest rates would even go lower which is the fuel for all bull markets in gold Real interest rates are even lower now than they were in 2001-2002 which was the fuel for the initial run in gold. << Interest rates matter, but so does the overall money supply which is actually contracting right now. >> We have seen a few of these deflation scares over this commodity bull and this one looks no different. << Looking at the $BKX and what is happening there this one DOES look different. >> IMO this sharp reaction may be like the tech market had in 1998 before the real fun started. << That's one possibility especially if gold holds here. At this pt I think I've said what I need to say. I need a time-out as all this posting is too time intensive for what I get back. I do appreciate the debate, but it appears we're talking at each other vs to each other too often.