Gold breaks $1800

[FluffyMcDeath]

It wasn't long ago that gold passed $1700. It has quickly moved to $1800, fallen back for a bit now, but it's starting to feel like it could hit that kind of momentum where a panic buying rush could set in and blow a big bubble. If it hits $2000, things could get interesting.

 

[Dammy]

It wasn't long ago that gold passed $1700. It has quickly moved to $1800, fallen back for a bit now, but it's starting to feel like it could hit that kind of momentum where a panic buying rush could set in and blow a big bubble. If it hits $2000, things could get interesting.

Things won't get interesting until it hits atleast $3K and Silver in the $75-100 range. JP Morgan/Chase already said they expect it to hit $2,500 by the end of the year. I heard one guy estimate the time that inflation gets it's death grips around the US dollar, gold may hit $7,500. Gold goes up, dollar goes down. Add in oil crises next year, hedge fund sharks going into a kill frenzy over the US dollar weakness, EURO crashes and the US dollar will follow into the worthless catagory.

 

[FluffyMcDeath]

I heard one guy estimate the time that inflation gets it's death grips around the US dollar, gold may hit $7,500. Gold goes up, dollar goes down. Add in oil crises next year, [...]

As for oil crisis it seems, strangely the oil prices are headed down in USD which is weird with a falling dollar and either means that production is going through the roof (I doubt), demand is falling through the floor (a more reasonable assumption but that much?) or the oil price was a speculator inflated price and the money is sloshing over to other investments (which probably accounts for a portion of the fall).

As to the dollar death spiral by inflation, do you think anyone will have the nerve to hike interest rates to prop it up? That would probably hurt worse than it would help.

One thing that could help a little is let the interest rate on bank reserve go negative for a while - that way banks that are sitting on reserves instead of lending them out will lose money on their reserves. They'll be forced to loan it out and move it through the economy. Would also be somewhat inflationary but could drive production to soak up the extra bills and plump the tax rolls a little.

 

[FluffyMcDeath]

Completely unsubstantiated random web posting that I'm not even going to pretend I can vouch for but it makes me all warm inside.

In summary:
Gold is getting hotter.
The shorts got badly hurt.
Guys waiting for physical delivery are getting impatient.

 

[cybereye]

As to the dollar death spiral by inflation, do you think anyone will have the nerve to hike interest rates to prop it up? That would probably hurt worse than it would help.

I don’t know if the FED has the nerve to hike the interest rates to prop it up, but there is a possible that the FED may sell the 3 trillion dollar of US treasury bonds as a way to curb the inflation. Will it help, who knows? That is up to the people who have faith with the government’s treasury. What may also happen is to raise the interest rates on the treasury bonds as well. I would think that would be a bad move if they raise the interest rates on the treasury bonds.

 

[Dammy]

I don’t know if the FED has the nerve to hike the interest rates to prop it up, but there is a possible that the FED may sell the 3 trillion dollar of US treasury bonds as a way to curb the inflation. Will it help, who knows? That is up to the people who have faith with the government’s treasury. What may also happen is to raise the interest rates on the treasury bonds as well. I would think that would be a bad move if they raise the interest rates on the treasury bonds.

Fed now says no interest rate hikes until after the election (end of 2012). Funny that they can say something like that when it use to be holding one's breath ever quarter to see if the Feds were going to increase the rate more. Fed really can't raise it, not when they owe $15T in outstanding debt because they would have to pay more then 1.5% they are currently paying. It was said for every 1% increase, the cost of servicing all that debt rose by $100B annually but that was awhile ago when the national debt wasn't as large as it is today. According to deal Nancy P., that deficit ceiling raise of $2.4T will only last for 18 months, after the 2012 election and we will owe around $18T in debt, happy Xmas 2012!

So if the Fed raises interest rates that it should be doing very shortly, if not now, and it goes up to 2.75% on Jan 20, 2013, we will be paying on short term debt of ~$41B monthly just to cover the servicing of debt or just under half a trillion dollars coming out of the US budget for the year. Now the long term (30 year) is now up to 3.75% because no one was buying them, nor should they. I'm not sure what idiot would want to be paid 3.75% over 30 years when they are going to lose out on inflation over those 30 years.

But the most extreme move is in yields on 30-year US Treasuries, which are rising by the most since the early 1980s, a rise of more than 27 basis points to yields of 3.75 per cent.

http://www.ft.com/intl/cms/s/0/63bf4174-c165-11e0-b8c2-00144feabdc0.html#axzz1UlZQuPkc