It should no longer amaze me to witness just how reactionary traders can be. They hinge on every freaking word coming from the mouth of any Fed or Treasury official. “Jump? How high Mr. Paulson/Bernanke or in this case Plosser?” Why anyone takes them seriously at this point is beyond me. Obeying orders from the very agency responsible for the devastating boom/bust cycles that are pushing the economy to the brink of collapse. Brilliant. Better yet, let’s hand this PRIVATE organization a bunch of new authority to run and regulate the economy.
Yes, interest rates should be raised. I don’t disagree. But can you really do that when the economy is just beginning to slip into a recession. The Fed is truly between a rock and a hard place. Just because they say that interest rates “should” be raised, does not mean they have any intention of actually raising rates in the near future. It is all lip service, while the massive deficit spending continues. Yet, traders sent the dollar shooting higher, as gold gave back $60 in recent gains.
You can either make trading decisions based on a loose-lipped comments or on the actual behavior of our benevolent leaders. Weak hands will sell in the face of this short-term volatility, paving the way for an explosive move to the upside for gold and downside for the dollar. Moments like this should be used as buying opportunities for gold investors and I am not the only one holding this opinion. GATA published the following introduction to Mr. Embry’s newsletter, which can be viewed below:
Sprott Asset Management’s chief investment strategist, John Embry, argues in his latest column for Investor’s Digest of Canada that the more that U.S. government officials advocate a strong dollar, the less they will do to achieve it. For the U.S. economy is far too fragile to handle any substantial increase in interest rates, Embry says. Meanwhile, inflation is exploding around the world and is boosting demand for gold as an inflation hedge. You can find Embry’s column, “Gold’s Strength Is the U.S. Dollar’s Weakness,” at the Sprott Internet site here: