Gold, silver to jump on US rate cut tomorrow
Posted on 05 October 2008 with no comments from readers
The charter of the Federal Reserve allows its chairman to make rate cuts of up to 0.5 per cent at his discretion in between official meetings to set rates. Expect such a cut as soon as tomorrow morning.
The paralysis of the banking system is reaching boiling point with inter-bank rates soaring and the true cost of borrowing prohibitive for corporates. This will cause a chain reaction of financial and business failures if it is not quickly dealt with and Fed chairman Ben Bernanke has no illusions about what is at stake.
He will also have observed the poor response on Wall Street to the final passing of the $700 million bail out package. By delaying this law the Congress may have undone its main purpose: restoring confidence. Cutting the Fed base rate is one more card to play in this increasingly desperate game.
We should expect the Bank of England and the European Central Bank to follow suit – although the ECB left rates on hold last week and could take its time as usual.
That ought to mean a weakening of the US dollar – and this can be afforded after recent gains for the greenback. Gold will also rise as the dollar falls, and with it silver.
Precious metals are safe haven assets, particularly as currencies lower interest rates and enter a period of competitive devaluation. What is the best currency in a devaluation cycle? It has to be the one in fixed supply, and that can only mean precious metals.
Who cares about zero dividends on precious metals when devaluation is undermining currencies that pay low interest rates in any case. Perhaps that is why people are queuing in the streets of London to buy gold and are pulling money out of the crumbling banking system.
no Comments posted by readers:
“”What is the best currency in a devaluation cycle? It has to be the one in fixed supply, and that can only mean precious metals. Who cares about zero dividends on precious metals when devaluation is undermining currencies that pay low interest rates in any case.”"
This is VERY true, but I don’t think the average person understands this as they are fed “CDs and MoneyMarket Funds” I bought a few more gold coins over the weekend when I randomly found a local coin store, but Digital Gold like e-dinar & Goldmoney are the way buy and sell.
Mark
DGCmagazine
“By delaying this law the Congress may have
undone its main purpose: restoring confidence.”
Confidence can never be restored, it can only be
prevented from being lost. If you want to have
confidence anew, you need to start a new game.
“That ought to mean a weakening of the USDollar”
All currencies will weaken in relation to gold in
their competitive devaluations to the bottom.
“Gold will also rise as the
dollar falls, and with it silver.”
Gold does not rise or fall, never has, never will.
Everything else rises and falls in relation to gold.
Always has, always will. That is the essence of
a perfect metal in a world of imperfect men.
Silver? A manipulated plaything of the Money Men
who absolutely have to keep it’s price suppressed
as a lever against gold. Me thinks they try too hard.
The gold/silver ratio is over 75 ….. again.
“Precious metals are safe haven assets, particularly
as currencies lower interest rates and enter a period
of competitive devaluation. What is the best currency
in a devaluation cycle? It has to be the one in fixed
supply, and that can only mean precious metals.”
That is the only paragraph that was necessary.
“This is VERY true, but I don’t think the average
person understands this … ”
The average person understands nothing of this.
That is precisely what makes him ….. average.
WASHINGTON — The Federal Reserve chairman, Ben S. Bernanke, said on Tuesday that the turmoil in the financial markets had increased the risk to overall growth and that federal regulators would have to be vigilant to halt the slide.
“Over all, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased,” Mr. Bernanke told members of the National Association for Business Economics.
In an address that was at once sobering but hopeful, at least for the long term, Mr. Bernanke hinted strongly that the Fed’s Board of Governors would probably lower interest rates at its next meeting, on Oct. 28 and Oct. 29.
7am EST Wed, Feds cute rates 1/2 %— good call Peter. Will it help? Markets open in couple of hours.
Mark