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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (31978)	4/18/1999 12:26:00 AM
From: Zardoz	Read Replies (2) \| Respond to of 116763

Hutch:"Gold is not affected by interest rates. But is affected by Monetary supplies, US Dollar, and foreign exchanges. Beware the cyclical bubble. This is expiration week".... Jim:"If that were true gold would have been through the roof years ago, the FED has been priming the pump for years. Seems to me that gold can be very interest rate sensitive. Especially to rate direction and velocity. Apparently there are other factors holding it down, masking the effect of low rates. Jim" No. Because GOLD has no interest rates, no growth, no deflation or inflation attached to it, it can only be valued relative to other currencies that does. In the example of USA, and the pricing of gold relative to US dollars, the growth of the US economy is what has demised the price of the GOLD commodity. If growth is to continue, and inflation is not as high {true inflation, not CPI inflation} as growth then the economy may continue for years. But if we suspect that inflation is 6.25% and growth is 3.5-5.5% then the bonds will creep up higher. This will result in cash inflows into USA. But until the US fed moves on rates, the price of gold will remain low, and may decline further. Bonds moving in advance of FED is not good for gold, but is for the US Dollar. Try a plot of Gold price to interest rates, and you'll see that it's only coincidents that they correlate. But compare Gold to US Dollar index, and inversly to M2&M3 and they are .9+ correlated. Gold suffers from lack of monetary growth, and only has supply growth aiding it. To know where gold is going only requires M2&M3 data, US Dollar index, and there trends. {Other data on currencies and monetary policies are handled through exchange rates} And the US dollar index is but ONE index to consider, which is a basket of currencies. This is why I can say that this rally was a BUBBLE rally. Will soon burn out. And why Gold will be lower soon. XAU is affected by interest rates. Beware sucker rallies.