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As the world goes bearish over US dollar, dollar is ready to move up and gold ready for a collapse
As Bill Gates and Warren Buffett decided to short US Dollar, the greenbuck was smiling at them with vengeance. The fundamentals of US economy have changed dynamically specially compared to that of Europe. The bullishness on Gold is alarming and has persisted for more than six months while Gold has done nothing. US short term interest rates are moving up slowly compared to that of Europe. The long rates in US are low because foreign central banks need the greenback for investment and bond holding. The US recent trade report surprised every one as record US export hit a very high note. The oil consumption in US is moderating due to conservation and conscious consumer behavior.
In simple, all the ingredients are present for a long-term bull run for US dollar. What made it especially attractive was the recent unidentified Indian Government official in India confessing to a local reporter of Financial Times that India had to buy $6 Billion of Boeing commercial aircrafts because of American pressures? According to the official, American administration is really serious on reducing trade imbalance with India and China.
What that statement really meant was – Bush Administration is dead serious now on making dollar fundamentally strong through improved trade deficit and balance of payments.
It really means an opportunity for dollar to move up and Euro and Gold to come down sharply. While employment situation has improved in US, the same in Germany, France and Italy is pathetic. US consumers are strong and the retail sales are going up. The rest of the world is slowing down due to record oil price. But the resilient US economy is going sideways at a healthy 3.5% GDP growth.
US capacity utilization has risen to a robust 79% from 73% two years back.
Gold is in trouble. The Gold and Silver stock index normally make a move before the bullion. If that is the case then, Gold is ready to nose dive. Please see the slideshow of long term Gold and Gold& Silver index. In addition, the world economy is in a log term deflationary mode and the last three years was a phase of stagflation within that secular long-term deflation.
Do you want to make some money? Buy US Dollar and/or sell Gold. Do not get overly confident on Dollar though. After making some money move out of dollar. The ride will be bumpy and US Dollar long term will be trying to build some base. All really depends on US Government policies. For now Bush Administration really likes to see dollar strong because many oil producing countries are looking at Euro as the preferred currency.
Disclaimer: Trade at your own risk. We are not responsible for any loss. This is just an opinion. Trading in futures or stocks in the market is risky.
US ELECTION ARTICLES
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