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The primary driver of gold’s price is the US dollar. Gold is a currency, not a commodity. Gold’s primary function is Honest Money and secondarily bling. This is the simple and most profound misunderstanding where gold is concerned. Even the Gold Council holds this misunderstanding. You can see it when they talk themselves half to death about gold bling demand as if the entire gold equation was a product of jewelry consumption.
Treasury Secretary Paulson in China double talked by proclaiming the US holds a strong dollar policy and the dollar’s value should be made in the marketplace while calling for a higher value for the Chinese currency. How do you call for a higher Chinese currency and a strong dollar at the same time? That is simply a political clap-trap contradiction. A strong dollar was recently defined by the US Treasury as a dollar that is hard to counterfeit. Huh?
All of this is being accepted by the market as higher discount rate coming down the pike. They fail to see Yellen of the SF Fed trying to talk the economy back up. Was it not Greenspan that taught the Fed perception overcomes reality? He forgot to add “sometimes.”
The dollar therefore improved today based on a total misunderstanding of what the Secretary of the Treasury said and what motivated Yellen yesterday of the Federal Reserve System who was actually trying to talk up the economy, not rates. Oh well.
All of this invites the question of how could overnight money have traded over 20% and ten year Treasuries yielded 14 7/8% with gold rising $400 points in 1979 and 1980. The answer is quite simple and contained in the Formula. In the 70s US and world business activity slowed and tax receipts dropped. There was no meaningful improvement in the US Trade Deficit and the US Current Account suffered. It was the drop in the dollar that launched gold while interest rates rose, killing the economy and blowing the US Federal Deficit up. |
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狗仔卡
發表於 2006-9-9 22:10:44
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發表於 2006-9-10 12:58:16
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