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By Michael Filloon
Since gold was first used to back the US dollar, it has been the basic hedge against inflation. As with many of my writings, you have seen that I have thought we would see increased inflationary pressures throughout 2008. I still believe this to be the case, along with the premise that the stock market will rebound sometime in the late first quarter or second quarter of next year. The agricultural and commodity stocks have been right on, but gold as of late seems to be losing steam. Many of these scenarios have ended the same, with the miners buying back all of their hedges just in time for gold to go down. This time it looks to be no different.
I believe that we have seen a change in the US economy. I know everyone believes this time is different until they see that history does indeed repeat itself. The reason for it being different is a major shift into other markets. The majority of the problems facing our economy are related to energy. Our uncontrolled use of oil has placed us into a very difficult position.
It is basic supply and demand. Countries buy and sell goods. Their currency is valued by how much of a surplus they have (sell more than they buy). If a country has a trade surplus, the value of their money goes up and if the opposite happens, the value of their currency goes down. When the value of currency goes up, so does the cost of items to buy, causing inflation and decreasing the attractiveness of their goods overseas because it costs more. On the other side of things, as currency goes down in value it causes a deflated currency, which will do better overseas as the cost of goods is cheaper. When inflation increases, generally their will be an increase in rates to slow the economy and when there is deflation, there will be seen a cut in rates. All of this is important due to the fact that most of the United State's imports are oil.
When the US imports oil, it goes against our exports. In turn, we see increased demand for oil, plus China has been filling up its strategic oil reserves. This has placed large draw downs in oil inventories, even in a slowing economy. Not only is oil more expensive due to demand, but also our weak currency makes it more expensive, while buying oil increases our trade deficit and further weakens our dollar.
Realizing this vicious circle, those wanting to hedge against inflation have turned to buying oil. There are only a couple of ways to decrease the price of oil. The first is to decrease demand. This can be done by increasing taxes, or providing stimuli or bonuses to those who use less. It can also be done by hiking rates to inflate the dollar's value. The only problem with this is one of the worst housing crisis seen since the Depression. With the inability to hike rates, the Fed is hoping our slowing economy plus additional oil from Saudi Arabia will bring the price down. To go back to decreasing demand, this can be done when oil gets to expensive and people cannot to drive as much, and this may be the only way to clear this up. No matter how you look at it, oil will be the center of attention and although I believe this will be where the hot money will stay until next year.
Look for the dollar to rebound very slowly, causing a gradual decrease in the value of gold. I believe the forward trend will cause rates to be hiked as oil prices are getting high enough that we will have the inability to cut anymore, even though I believe the Fed would still like to maintain a downward bias. Being stuck at this position will increase the time it will take to come out of this hole. Look for oil to be the main focus going forward and gold to continue to slide as the dollar recovers. |
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發表於 2008-6-14 13:04:37
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久违了...天涯靓姐...阁下的单飘到岸了吗...到岸几多啊?
心想事成!!!
