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Bold? nope! Wired on caffeine? YES! how many sugars did you put in that (those!) coffees?
Does it really matter where the EURO is gonna go? Let it go up, down and sideways .. you are gonna make $$$. Am I right?
I stopped guessing where it will ot will not go for a while now. Immediate future is my thing now. 20-50 pips at a time.
Lets get it onnnn!
The old Ultimate is but a distant memory. I have no problem betting a big lot or two now. MACD divergence is king!
20 pips at a time dude. I stayed out of the news today. I only trade the changing of the sessions and look for MACD divergence. It has been serving me very well lately. If I can consistently get 20 pips I will just up my lot size. No more and no less. Good luck!
The PIP LORDS have spoken. The market is pricing in future rate cuts from the the fed. In and out for 20 pips at a time. Wish I caught the move up today. Shorting the EUR/USD at 1.3030 for 20-30 pips. It should be bought back up when it reaches 1.2990-1.3000 for a retest of the highs.
WOW! absolutely NOTHING moved! incredible! 3.5% is a great number. All eyes on FOMC.
While attention today will clearly turn to the FOMC statement from the Fed, the fact of the matter is that even under the most optimistic scenarios the Fed is likely to only maintain its hawkish bias rather than actually raise rates in the foreseeable future. To do so would risk tipping the badly damaged housing sector from a slowdown into a full blown recession. Despite the recent bounce in New Homes Sales, the underlying trends in housing remain weak with foreclosures continuing to rise and homeowner vacancies rates reaching record highs. We believe that these factors will prevent the Fed from actually hiking rates, unless US economy produces surprisingly strong growth results, materially above 3.00%. Only in this case, will the Fed consider resurrecting its tightening policy which it terminated in August of 2006. Thus, given the expectation that ECB will raise rates further while the Fed will not, the interest rate compression between the euro and the greenback should provide support to euro longs at the 1.2800-1.2900 zone.
http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Euro_Slightly_Down__Swissie_Gets_1170244673...
So it looks like it all hinges on the GDP today. Lets not forget that the US wants a lower dollar and all that happened these past months.
May the force be with you tomorrow young jedis. The next three days will set the trading tone for quite some time.
Ultimatepick
And a very special thanks to you too Glance! This board changed my life (for the better) forever.
I agree with you. The range for the EUR/USD "SHOULD BE" 1.2900 - 1.3100 give or take 10 or 20 pips. It is behaving the same way as the last week of June 2006. I do not see it going any higher than 1.3170ish and I see it tumbling down to test 1.2820 as I thought it would a couple of days ago. The week chart is showing major divergence and I see the EURO going down this year. Dare I say 1.2000???
Believe it! If the US keep rates steady for a long time it is very possible. All people care about really is interest rates. The rest of the data is just noise to evaluate if the rates will go up or down. Pretty sad .... like making a hole in water.
I am reading about options to hedge my long term bets in the spot forex market. Apparently you win even when you lose. Do you trade options?
How is everybody doing? I am kinda reluctant to take a position with all this data coming out wed-fri. I see major whipsaws in the horizon. Maybe play a range of 1.2820 - 1.3000 for the EUR/USD? What are your plans?
LOOK! It's a bird, it's a plane, it's SUPERCAT!
Maybe it was a flying cat?
The europeans are selling gold because they do not want it to go up ie inflation to go up ie raise euro rates ie the EUR will go to da moon ie that will hurt their exports real bad. If gold goes up the us economy will go down and the europeans will not export as much to the US. get it? lol!
Also if the europeans keep raising rates the EUR will scream and their stock market (DAX etc) will crash so bad it would not be funny.
Their gold selling is being EASILY absorbed by the Asians.
Sure! we can be the tom and jerry of forex. replace the mouse with a doggy.
Geez man ... were you a journalist in your prior life?
All I need to do is tune into Glance TV CHANNEL right here on Forex Traders.
You rock man!
Maybe they are waiting for everybody to become short and then they will blast it off into space. Those devious charlatans are up to something. What makes you think the EUR is gonna gonna go up?
Look at this article:
US Dollar Holds Support: Unleash the Bull
http://www.dailyfx.com/story/dailyfx_reports/daily_technicals/US_Dollar_Holds_Support__Unleash_11696...
GBP is showing HUGE divergence on the daily and the EUR monthly chart looks good for a huge leg down.
But with the US in Iraq and stuff ... the dollar should go down. What do you think?
The rest of you dudes please chime in too.
The EUR/USD has been flipping from net long to net short for the past 2 weeks but they are for the most part net short. hat means it is goin up. The GBP has been net short with no flipping.
SSI: USDJPY Open Interest 10% Higher Than Last Month
Monday, 22 January 2007 10:47:28 GMT
Written by Jamie Saettele, Technical Currency Analyst
FXCM Speculative Sentiment Index
January 22, 2007
EURUSD -1.24 45% Bullish
GBPUSD -3.56 23% Bullish
USDCAD 1.89 65% Bearish
USDCHF 1.77 64% Bearish
USDJPY -1.64 62% Bullish
EURUSD - The ratio of longs to shorts is -1.24 as 55.3% of the currently open orders are short. Long orders are 7.0% higher than yesterday and 4.2% stronger since last week. Short orders are 4.7% higher than yesterday and 2.0% stronger since last week. Open interest is 5.7% stronger than yesterday and 3.9% below its monthly average. Looking ahead, the SSI signals EURUSD strength.
GBPUSD - The ratio of longs to shorts is -3.43 as 77.4% of the currently open orders are short. Long orders are 4.2% higher than yesterday and 3.9% weaker since last week. Short orders are 1.2% higher than yesterday and 12.5% stronger since last week. Open interest is 1.8% stronger than yesterday and 0.5% below its monthly average. Looking ahead, the SSI signals GBPUSD strength.
USDCAD - The ratio of longs to shorts is 1.89 as 65.4% of the currently open orders are long. Long orders are 0.7% lower than yesterday and 5.0% stronger since last week. Short orders are 3.1% higher than yesterday and 6.2% weaker since last week. Open interest is 0.5% stronger than yesterday and 3.2% above its monthly average. Looking ahead, the SSI signals USDCAD weakness.
USDCHF - The ratio of longs to shorts is 1.77 as 63.9% of the currently open orders are long. Long orders are 1.7% higher than yesterday and 0.8% stronger since last week. Short orders are 7.5% higher than yesterday and 14.3% stronger since last week. Open interest is 3.7% stronger than yesterday and 4.0% below its monthly average. Looking ahead, the SSI signals USDCHF weakness.
USDJPY - The ratio of longs to shorts is -1.64 as 62.2% of the currently open orders are short. Long orders are 2.7% higher than yesterday and 5.2% stronger since last week. Short orders are 4.6% higher than yesterday and 8.7% stronger since last week. Open interest is 3.9% stronger than yesterday and 10.1% above its monthly average. Looking ahead, the SSI signals USDJPY strength.
SSI: USD/JPY Shorts take profits
Wednesday, 24 January 2007 17:36:11 GMT
Written by Antonio Sousa, Currency Analyst
Currency | Quote | Ratio | %long | Signal
EURUSD 1.2956 -1.10 48% Bullish
GBPUSD 1.9667 -3.15 24% Bullish
USDJPY 120.88 -1.48 40% Bullish
USDCHF 1.2492 1.71 63% Bearish
USDCAD 1.1803 1.79 64% Bearish
USDJPY – Today USD/JPY Short orders are 3.6% lower than yesterday mostly on profit taking. The ratio of longs to shorts is -1.48 as 59.7% of the currently open orders are short. Open interest is 0.7% weaker than yesterday and 102.0% above its monthly average. Still looking ahead, the SSI signals USDJPY strength.
EURUSD - The ratio of longs to shorts is -1.08 as 52.0% of the currently open orders are short. Long orders are 18.2% higher than yesterday and 13.3% stronger since last week. Short orders are 5.8% lower than yesterday and 6.6% stronger since last week. Open interest is 4.4% stronger than yesterday and 115.5% above its monthly average. Looking ahead, the SSI signals EURUSD strength.
GBPUSD - The ratio of longs to shorts is -3.15 as 75.9% of the currently open orders are short. Long orders are 11.7% higher than yesterday and 8.0% weaker since last week. Short orders are 8.4% lower than yesterday and 12.4% weaker since last week. Open interest is 4.2% weaker than yesterday and 93.7% above its monthly average. Looking ahead, the SSI signals GBPUSD strength.
USDCHF - The ratio of longs to shorts is 1.71 as 63.1% of the currently open orders are long. Long orders are 3.0% lower than yesterday and 7.2% stronger since last week. Short orders are 6.7% higher than yesterday and 9.9% stronger since last week. Open interest is 0.4% stronger than yesterday and 117.8% above its monthly average. Looking ahead, the SSI signals USDCHF weakness.
USDCAD - The ratio of longs to shorts is 1.80 as 64.2% of the currently open orders are long. Long orders are 1.2% higher than yesterday and 2.4% stronger since last week. Short orders are 0.3% higher than yesterday and 5.7% stronger since last week. Open interest is 0.9% stronger than yesterday and 104.5% above its monthly average. Looking ahead, the SSI signals USDCAD weakness.
You are hilarious! Abd the other arm will be ripped off by what currency pair?
Did you see the move in GBP/JPY last night?
Dropped out of the blue with no news. Gawd!
You gotta have big stones to trade that pair.
As Glance once said : GBP/JPY will rip your arm off the mouse and beat you with it! ..... or something like that.
Care to clarify Glance?
I have been religiously following the EUR/USD the past 10 days and I agree with you that there are weird things happening or are going to happen. Just can't figure out which way it will go. Time will tell. GBP/USD is showing mucho divergence. Their preemptive rate hike was a one shot thing to stop inflation in it's tracks I believe. They will lower the rates quick if they see inflation is under control. If you look at the weekly chart you can see that the GBP should go down.
OPEC Dumps $10.1 Billion of Treasuries as Oil Tumbles (Update2)
By Bo Nielsen and Daniel Kruger
Jan. 22 (Bloomberg) -- OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble, sending bond yields higher.
Exporters including Indonesia, Saudi Arabia and Venezuela, sold 9.4 percent, or $10.1 billion, of their U.S. government debt securities in the three months ended in November, according to Treasury Department data. Members of the Organization of Petroleum Exporting Countries last sold Treasuries for three straight months in June 2003.
Oil producers have surpassed Asian central banks as the largest pool of global savings, accumulating an estimated $500 billion in 2006 alone, according to research by Pacific Investment Management Co. The sales during those three months mark a reversal because OPEC countries have boosted their holdings of U.S. government bonds by 70 percent to $97 billion in the past 17 months, Treasury data show.
``There will be a significant sell-off,'' Joseph Stiglitz, a Nobel laureate and economics professor at Columbia University in New York, said in an interview. ``Medium-term and long-term yields will go up.''
Oil producers, including non-OPEC countries, have disclosed almost $200 billion of U.S. government, corporate and agency bonds, said Ramin Toloui, who helps manage about $641 billion for Newport Beach, California-based Pimco, a unit of Munich-based Allianz SE. The holdings are split about evenly between securities due in less than a year and those with longer maturities.
Higher Yields
Treasury 10-year note yields fell one basis point to 4.77 percent as of 9:05 a.m. in New York. The price of the 4 5/8 percent note due in November 2016 rose 3/32 to 98 29/32. Yields on two-year notes fell 1 basis point to 4.91 percent. Bond prices move inversely to yields.
OPEC members were selling Treasuries as crude prices declined 34 percent from a record high of $78.40 a barrel in July. They are reducing demand for U.S. government bonds at the same time as central banks from China to Romania say they want to cut holdings of dollar-denominated assets.
For every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion, according to estimates by Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc.
Yields on the benchmark 10-year note have climbed 35 basis points from a 10-month low in December as economic data on housing and employment suggested the Federal Reserve would not cut its target rate for overnight loans between banks from 5.25 percent before June.
Investing `Petrodollars'
Short-term yields have remained above those on longer-term securities since mid-August. That situation, known as an inverted yield curve, has occurred only 11 percent of the time in the past two decades, according to Bloomberg data. Traders watch that difference because four of the past five recessions have been preceded by inverted yield curves.
``The pickup in oil revenues and the recycling of the petrodollars'' was one reason for 10-year yields falling as low as 4.33 percent last year, said George Goncalves, a fixed-income strategist in New York at Bank of America Corp.
`Money to Invest'
OPEC export revenue will decline by about $42 billion by the second quarter, from a peak of $126 billion in the third quarter of 2006 as oil prices tumble, according to estimates from commodity analysts at Charlotte, North Carolina-based Bank of America. Crude for February delivery fell $1 last week to $51.99 a barrel on the New York Mercantile Exchange.
``Lower oil prices mean less inflation pressure, but that doesn't seem to be going on,'' said Stiglitz of Columbia. ``The dollar has been subjected to a great amount of exchange-rate volatility, and it's not a good store of value anymore.''
OPEC countries increased holdings of U.S. government bonds by 115 percent from 2002 to 2006 when the price per barrel rose almost tripled, according to Treasury data.
They still hold more Treasuries than in 2005, when oil prices jumped 41 percent.
``Oil prices are still high compared to the long-run average, and that leaves the oil-producing countries with money to invest in U.S. Treasuries,'' said Torsten Slok, an economist at Deutsche Bank AG in New York.
Deutsche Bank estimates Middle East countries will stop investing in U.S. securities should oil decline to $30 a barrel. Oil averaged $33.28 a barrel for the 10 years ended in 2006.
Foreign Reserves
The oil exporters in the Middle East, Asia, Africa and South America bought a monthly average of $2.5 billion of U.S. fixed- income securities in the 12 months ended in May 2005, when crude oil averaged about $42 a barrel, Goncalves said. Purchases jumped to $7.3 billion a month from June 2005 through August 2006, when oil averaged about $60 a barrel, he said.
``When you bring the oil price down, that's going to take a lot of excess money off the table,'' said Andrew Brenner, head of global fixed income for New York-based Hapoalim Securities USA, which has $70 billion under management.
Only Japan, China and the U.K. own more Treasuries than the 12-OPEC nations, according to Treasury data released last week. The OPEC data doesn't include securities owned by Russia and Norway, which account for 40 percent of oil producer reserves, according to Toloui at Pimco.
Central bankers in oil producers Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets.
China, the second-largest holder of U.S. debt, also is cutting back holdings. The central bank, which owned $346.5 billion of Treasuries as of November, trimmed purchases by 1.7 percent in the first 10 months of 2006, Treasury figures show.
``The Chinese are slowing down their buying, so that leaves a big hole after the oil money,'' said Brenner at Hapoalim Securities.
GBP/USD may break 2.000 by the end of the week. wow!
amen!
I am sick and tired of these frackin ridiculous pip spreads!
I just applied for an account with MBTRADING.
http://www.mbtrading.com/fx/default.asp
400 bucks initial deposit and 100:1 leverage.
Frackin a!
Oanda only gives you 50:1 with similar pip spreads.
I discovered that I am excellent at scalping ... but these 3 pip spreads on the EUR/USD with the other brokers is cutting into my profits in a HUGE way. Frack that! Can you tell I am pissed?
MBTRADING has some good reviews!
http://www.forexbastards.com/mbtrading.shtml
Look at these pip spreads ... even a cat would cream in it's fur!
After reading all this stuff today I am convinced. The JPY sucks royal AZZ and is not going to get their shit together anytime soon. Carry trade is king!
I am going long all the JPY crosses in small quantities at a time.
I read many stories saying that USD/JPY is goin to 127-128 ish because the rate differential is too sweet to give up. The japs gotta get their shit together soon or else the US and EUR are gonna start freaking out.
Dog-owners 'lead healthier lives'
http://news.bbc.co.uk/2/hi/health/6279701.stm
Cat-owners wonder why they ever chose a cat over a dog.
Disadvanatages of cats :
- Moody
- Annoying (they need love when they feel like it)
- Can't trade the EUR/USD!
Why would you ever want a cat?
Well your fur just got whiter and stickier.
AS SOON as you bought the EUR it plunged 10 pips! Thanks alot man. You are REALLY helping my USD/CHF short!
Thanks!
cushion dude ... you have a couple of mins to edit your post
LOL!
Now I am really screwed!
You think that was good? You will cream in your USD/JPY pants with this one!
Tailoring Your Technical Approach
to Currency "Personalities"
by: Brian Dolan
http://www.forex.com/currency_pairs.html
he next most actively traded currency pair is USD/JPY, which accounted for 17 percent of daily global volume in the 2004 BIS survey of currency market turnover. USD/JPY has traditionally been the most politically sensitive currency pair, with successive U.S. governments using the exchange rate as a lever in trade negotiations with Japan. While China has recently replaced Japan as the Asian market evoking U.S. trade tensions, USD/JPY still acts as a regional currency proxy for China and other less-liquid, highly regulated Asian currencies. In this sense, USD/JPY is frequently prone to extended trending periods as trade or regional political themes (e.g. yuan revaluation) play out.
For day-to-day trading, however, the most significant feature of USD/JPY is the heavy influence exerted by Japanese institutional investors and asset managers. Due to a culture of intra-Japanese collegiality, including extensive position and strategy information-sharing, Japanese asset managers frequently act in the same direction on the yen in the currency market. In concrete terms, this frequently manifests itself in clusters of orders at similar price or technical levels, which then reinforce those levels as points of support or resistance. Once these levels are breached, similar clusters of stop loss orders are frequently just behind, which in turn fuel the breakout. Also, as the Japanese investment community moves en masse into a particular trade, they tend to drive the market away from themselves for periods of time, all the while adjusting their orders to the new price levels, for instance raising limit buy orders as the price rises.
An alternate tactic frequently employed by Japanese asset managers is to stagger orders to take advantage of any short-term reversals in the direction of the larger trend. For example, if USD/JPY is at 115.00 and trending higher, USD/JPY buying orders would be placed at arbitrary price points, such as 114.75, 114.50, 114.25 and 114.00, to take advantage of any pullback in the broader trend. This also helps explain why USD/JPY frequently encounters support or resistance at numerically round levels, even though there may be no other corresponding technical significance.
Take A Look at Trendlines
Turning to the technical side of USD/JPY, the foregoing discussion suggests trendline analysis as perhaps the most significant technical tool for trading USD/JPY. Because of the clustering of Japanese institutional orders around technical or price levels, USD/JPY tends to experience fewer false breaks of trendlines. For example, large-scale selling interest at technical resistance will need to be absorbed if the technical level is to be broken. This is likely to happen only if a larger market move is unfolding, and this suggests any break will be sustained. This makes USD/JPY ideal for breakout traders who employ stop-loss entry orders on breaks of trendline support or resistance. Short-Chartterm trendlines, such as hourly or 15 minutes, can be used effectively, but traders need to operate on a similarly short-term basis; daily closing levels hold the most meaning in USD/JPY. In terms of chart analysis, Japanese institutional asset managers rely heavily on candlestick charts (which depend heavily on daily close levels) and traders would be well-advised to learn to recognize major candlestick patterns, such as doji, hanging man, tweezer tops/bottoms and the like. See Figure 2. When it comes to significant trend reversals or pauses, daily close (5 p.m. EST), candlesticks are highly reliable leading indicators.
The yen discussion above also highlighted the factors behind the propensity of USD/JPY to trend over the medium-term (multiweek). This facet suggests traders should look to trend following tools such as moving averages (21- and 55-day perio ds are heavily used), DMI, and Parabolic SAR. (This refers to J. Welles Wilder Jr.'s Parabolic System. SAR stands for stop and reverse.) Momentum oscillators such as the relative strength index (RSI), MACD or stochastics should generally be avoided, especially intraday, due to the trending and institutional nature driving USD/JPY. While a momentum indicator may reverse course, typically suggesting a potential trade, price action often fails to reverse enough to make the trade worthwhile due to underlying institutional interest. Instead of reversing along with momentum, USD/JPY price action will frequently settle into a sideways range, allowing momentum studies to continue to unwind, until the underlying trend resumes. Finally, Ichimoku analysis (roughly translated as one-glance cloud chart) is another largely Japanese-specific trend identification system that highlights trends and major reversals.
Currency Personalities
Anybody have anything else to add to this list?
Got this from :
http://www.forexproject.com/Blog/Learn_Forex/Currency_Personalities_Revisited/
EUR/USD
1. Depth of liquidity means that this pair experiences prolonged, inconclusive tests of technical levels
2. Breakout traders need to allow for a great margin of error: 20-30 pips
3. If USD/CHF and GBP/USD have broken equivalent technical levels, EUR/USD is likely to do the same after a lag
4. Momentum indicators are well-suited
5. Reliance of short-term indicators (30-minute) exposes traders to an increased likelihood of whipsaw movement
6. MACD is well-suited because it utilizes EMA resulting in fewer false crossovers
7. When large movements under way, DMI is useful for confirming whether a trend is in place. If so, momentum indicators should be discounted and reliance might be placed on DI+/DI- crossovers
USD/JPY
1. Most politically sensitive pair
2. Heavy influence exerted by Japanese institutional investors and asset managers
3. Cluster of orders at similar price or technical levels
4. Similar clusters of stop loss orders
5. Frequent encounter with support or resistance at numerically round levels
6. Trendline analysis most fitting
7. Ideal for breakout traders who employ stop-loss entry orders on breaks of trendline support or resistance
8. Short-term trendlines can be effective
9. Heavy reliance on candlestick charts
10. Daily close candlesticks are highly reliable leading indicators
11. Trend over the medium-term
12. Look to trend following tools such as MA(21, 55 are heavily used), DMI, Parabolic SAR
13. Momentum indicators such as RSI, MACD, or stochastics should generally be avoided, especially intraday due to trending and institutional nature driving this pair (INTERESTING??)
14. Ichimoku analysis <====== YOOHOO glance ... here kitty ... here kitty!!
GBP/USD
1. Reaction to US and UK fundamental data
2. Price action has a one-way tendency during larger moves
3. More proactive risk management
4. Watch short-term false breaks of chart levels
5. Focus on charts > 240-minutes
6. For those positioned with a move, trailing stops with Parabolic SAR are well suited
7. Longer-period oscillators can be used to highlight potential reversals or divergent price action
8. Momentum signals should be confirmed by break of trendlines, Fibonacci retracements, or parabolic levels
9. Frequently exceed 61.8 retrace, only to stall at 76.4 level.
10. Williams %R is well suited with overbought/oversold bands adjusted to -10/-90
USD/CHF
1. Trades mostly based on overall U.S. dollar sentiment
2. Leading indicator for major U.S. dollar movements
3. False break of technical levels common
4. Not unusual for price to trade 15-25 points through support/resistance before reversing
5. More proactive risk management
6. Watch short-term false breaks of chart levels
7. Focus on charts > 240-minutes
8. For those positioned with a move, trailing stops with Parabolic SAR are well suited
9. Longer-period oscillators can be used to highlight potential reversals or divergent price action
10. Momentum signals should be confirmed by break of trendlines, Fibonacci retracements, or parabolic levels
11. Frequently exceed 61.8 retrace, only to stall at 76.4 level.
12. Williams %R is well suited with overbought/oversold bands adjusted to -10/-90
I have to do everything for you? Draw it yourself bud! It is better for a girl to wear lingerie than to be completely naked off the bat. We gotta let the old imagination do the work.
The site has great COT charts!
Looks like the dollar index is gonna go up? Glance I need your input on this. Open interest is falling so the move up is gonna run out of gas?
http://www.timingcharts.com/getchart.php?img=chart1&id=4a754020e41d9aae85d50f775ab18e0145b4ace0d...
A Vote of "No Confidence", Part 1
Hon. Ron Paul of Texas
Before the U.S. House of Representatives
Sorry about the bold letters. What can I say I just love bolding letters lol! Seriously though, I find this article extremely awesome and touches on many points. The politicians are not the only ones to blame for this mess. THE AMERICAN PEOPLE want this (NEED THIS) creating money out of thin air to continue for the stated reasons.
They gotta lay of the drugs dudes. Easier said than done and I see a huge mess on the world's hands in the near future.
Here is the article.
Enjoy!
The financial press, and even the network news shows, have begun reporting the price of gold regularly. For twenty years, between 1980 and 2000, the price of gold was rarely mentioned. There was little interest, and the price was either falling or remaining steady.
Since 2001 however, interest in gold has soared along with its price. With the price now over $600 an ounce, a lot more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold means.
The rise in gold prices from $250 per ounce in 2001 to over $600 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It's static, and does not grow as sound investments should.
It's more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a vital role in determining the quality of the investment and the profits made.
Buying gold and holding it is somewhat analogous to converting one's savings into one hundred dollar bills and hiding them under the mattress - yet not exactly the same. Both gold and dollars are considered money, and holding money does not qualify as an investment. There's a big difference between the two however, since by holding paper money one loses purchasing power. The purchasing power of commodity money, i.e. gold, however, goes up if the government devalues the circulating fiat currency.
Holding gold is protection or insurance against government's proclivity to debase its currency. The purchasing power of gold goes up not because it's a so-called good investment; it goes up in value only because the paper currency goes down in value. In our current situation, that means the dollar.
One of the characteristics of commodity money - one that originated naturally in the marketplace - is that it must serve as a store of value. Gold and silver meet that test - paper does not. Because of this profound difference, the incentive and wisdom of holding emergency funds in the form of gold becomes attractive when the official currency is being devalued. It's more attractive than trying to save wealth in the form of a fiat currency, even when earning some nominal interest. The lack of earned interest on gold is not a problem once people realize the purchasing power of their currency is declining faster than the interest rates they might earn. The purchasing power of gold can rise even faster than increases in the cost of living.
The point is that most who buy gold do so to protect against a depreciating currency rather than as an investment in the classical sense. Americans understand this less than citizens of other countries; some nations have suffered from severe monetary inflation that literally led to the destruction of their national currency. Though our inflation - i.e. the depreciation of the U.S. dollar - has been insidious, average Americans are unaware of how this occurs. For instance, few Americans know nor seem concerned that the 1913 pre-Federal Reserve dollar is now worth only four cents. Officially, our central bankers and our politicians express no fear that the course on which we are set is fraught with great danger to our economy and our political system. The belief that money created out of thin air can work economic miracles, if only properly "managed," is pervasive in D.C.
In many ways we shouldn't be surprised about this trust in such an unsound system. For at least four generations our government-run universities have systematically preached a monetary doctrine justifying the so-called wisdom of paper money over the "foolishness" of sound money. Not only that, paper money has worked surprisingly well in the past 35 years - the years the world has accepted pure paper money as currency. Alan Greenspan bragged that central bankers in these several decades have gained the knowledge necessary to make paper money respond as if it were gold. This removes the problem of obtaining gold to back currency, and hence frees politicians from the rigid discipline a gold standard imposes.
Many central bankers in the last 15 years became so confident they had achieved this milestone that they sold off large hoards of their gold reserves. At other times they tried to prove that paper works better than gold by artificially propping up the dollar by suppressing market gold prices. This recent deception failed just as it did in the 1960s, when our government tried to hold gold artificially low at $35 an ounce. But since they could not truly repeal the economic laws regarding money, just as many central bankers sold, others bought. It's fascinating that the European central banks sold gold while Asian central banks bought it over the last several years.
Since gold has proven to be the real money of the ages, we see once again a shift in wealth from the West to the East, just as we saw a loss of our industrial base in the same direction. Though Treasury officials deny any U.S. sales or loans of our official gold holdings, no audits are permitted so no one can be certain.
The special nature of the dollar as the reserve currency of the world has allowed this game to last longer than it would have otherwise. But the fact that gold has gone from $252 per ounce to over $600 means there is concern about the future of the dollar. The higher the price for gold, the greater the concern for the dollar. Instead of dwelling on the dollar price of gold, we should be talking about the depreciation of the dollar. In 1934 a dollar was worth 1/20th of an ounce of gold; $20 bought an ounce of gold. Today a dollar is worth 1/600th of an ounce of gold, meaning it takes $600 to buy one ounce of gold.
The number of dollars created by the Federal Reserve, and through the fractional reserve banking system, is crucial in determining how the market assesses the relationship of the dollar and gold. Though there's a strong correlation, it's not instantaneous or perfectly predictable. There are many variables to consider, but in the long term the dollar price of gold represents past inflation of the money supply. Equally important, it represents the anticipation of how much new money will be created in the future. This introduces the factor of trust and confidence in our monetary authorities and our politicians. And these days the American people are casting a vote of "no confidence" in this regard, and for good reasons.
The incentive for central bankers to create new money out of thin air is twofold. One is to practice central economic planning through the manipulation of interest rates. The second is to monetize the escalating federal debt politicians create and thrive on.
Today no one in Washington believes for a minute that runaway deficits are going to be curtailed. In March alone, the federal government created an historic $85 billion deficit. The current supplemental bill going through Congress has grown from $92 billion to over $106 billion, and everyone knows it will not draw President Bush's first veto. Most knowledgeable people therefore assume that inflation of the money supply is not only going to continue, but accelerate. This anticipation, plus the fact that many new dollars have been created over the past 15 years that have not yet been fully discounted, guarantees the further depreciation of the dollar in terms of gold.
There's no single measurement that reveals what the Fed has done in the recent past or tells us exactly what it's about to do in the future. Forget about the lip service given to transparency by new Fed Chairman Bernanke. Not only is this administration one of the most secretive across the board in our history, the current Fed firmly supports denying the most important measurement of current monetary policy to Congress, the financial community, and the American public. Because of a lack of interest and poor understanding of monetary policy, Congress has expressed essentially no concern about the significant change in reporting statistics on the money supply.
Beginning in March, though planned before Bernanke arrived at the Fed, the central bank discontinued compiling and reporting the monetary aggregate known as M3. M3 is the best description of how quickly the Fed is creating new money and credit. Common sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation. Yet this report is no longer available to us and Congress makes no demands to receive it. F--king assholes!!!
Though M3 is the most helpful statistic to track Fed activity, it by no means tells us everything we need to know about trends in monetary policy. Total bank credit, still available to us, gives us indirect information reflecting the Fed's inflationary policies. []
Capitalist ... do you have total bank credit factored into your calculations?
But ultimately the markets will figure out exactly what the Fed is up to, and then individuals, financial institutions, governments, and other central bankers will act accordingly. The fact that our money supply is rising significantly cannot be hidden from the markets.
The response in time will drive the dollar down, while driving interest rates and commodity prices up. Already we see this trend developing, which surely will accelerate in the not too distant future. Part of this reaction will be from those who seek a haven to protect their wealth - not invest - by treating gold and silver as universal and historic money. This means holding fewer dollars that are decreasing in value while holding gold as it increases in value.
A soaring gold price is a vote of "no confidence" in the central bank and the dollar. This certainly was the case in 1979 and 1980. Today, gold prices reflect a growing restlessness with the increasing money supply, our budgetary and trade deficits, our unfunded liabilities, and the inability of Congress and the administration to reign in runaway spending.
Denying us statistical information, manipulating interest rates, and artificially trying to keep gold prices in check won't help in the long run. If the markets are fooled short term, it only means the adjustments will be much more dramatic later on. And in the meantime, other market imbalances develop.
The Fed tries to keep the consumer spending spree going, not through hard work and savings, but by creating artificial wealth in stock markets bubbles and housing bubbles. When these distortions run their course and are discovered, the corrections will be quite painful.
Likewise, a fiat monetary system encourages speculation and unsound borrowing. As problems develop, scapegoats are sought and frequently found in foreign nations. This prompts many to demand altering exchange rates and protectionist measures. The sentiment for this type of solution is growing each day.
Though everyone decries inflation, trade imbalances, economic downturns, and federal deficits, few attempt a closer study of our monetary system and how these events are interrelated. Even if it were recognized that a gold standard without monetary inflation would be advantageous, few in Washington would accept the political disadvantages of living with the discipline of gold - since it serves as a check on government size and power..
This is a sad commentary on the politics of today. The best analogy to our affinity for government spending, borrowing, and inflating is that of a drug addict who knows if he doesn't quit he'll die; yet he can't quit because of the heavy price required to overcome the dependency. The right choice is very difficult, but remaining addicted to drugs guarantees the death of the patient, while our addiction to deficit spending, debt, and inflation guarantees the collapse of our economy.
Special interest groups, who vigorously compete for federal dollars, want to perpetuate the system rather than admit to a dangerous addiction. Those who champion welfare for the poor, entitlements for the middle class, or war contracts for the military industrial corporations, all agree on the so-called benefits bestowed by the Fed's power to counterfeit fiat money. Bankers, who benefit from our fractional reserve system, likewise never criticize the Fed, especially since it's the lender of last resort that bails out financial institutions when crises arise. And it's true, special interests and bankers do benefit from the Fed, and may well get bailed out - just as we saw with the Long-Term Capital Management fund crisis a few years ago. In the past, companies like Lockheed and Chrysler benefited as well. But what the Fed cannot do is guarantee the market will maintain trust in the worthiness of the dollar. Current policy guarantees that the integrity of the dollar will be undermined. Exactly when this will occur, and the extent of the resulting damage to financial system, cannot be known for sure - but it is coming. There are plenty of indications already on the horizon.
Foreign policy plays a significant role in the economy and the value of the dollar. A foreign policy of militarism and empire building cannot be supported through direct taxation. The American people would never tolerate the taxes required to pay immediately for overseas wars, under the discipline of a gold standard. Borrowing and creating new money is much more politically palatable. It hides and delays the real costs of war, and the people are lulled into complacency - especially since the wars we fight are couched in terms of patriotism, spreading the ideas of freedom, and stamping out terrorism. Unnecessary wars and fiat currencies go hand-in-hand, while a gold standard encourages a sensible foreign policy.
To be continued next week…
Congressman Ron Paul
http://www.silverbearcafe.com/private/noconfidence.html
US Dollar (USD) Lack of Buyers Characterize Tough Trading Week
hmmmmmmm ... I WONDER WHY!!?? I agree with you brother Glance. The market (my enemy ) is not stupid. They see through all the lies and deceit. The EUR might go down to 1.2700 ish because of the inverse head and shoulders?!! I see on the USD/CHF. Please tell me I am blind and it isn't what I beleive it is ... Anyways, there was good economic news all week last week and no dollar buyers. What is going to move this either way is piece of profound news. Remember that the Chinese (and all the world for that matter) want a GRADUAL devaluation of the USD.
Comments please.
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US Dollar - The price action in the US dollar over the past week suggests that there may no longer be any buyers left in the market. Nearly every piece of US economic data has surprised to the upside, highlighting the overall strength of the economy. Improvements have been seen everywhere from housing to manufacturing to the labor market, consumer spending and inflation. According to the University of Michigan Consumer confidence report, optimism hit a 3 year high in the month of January. Comments from Federal Reserve Presidents Hoenig and Bies also continued to confirm the market’s general belief that interest rates will remain unchanged throughout the first half of the year. Both Presidents felt that improvements in the economy should keep inflation risks skewed to the upside. All of this should have been very positive for the US dollar, but it wasn’t. Except for the Japanese Yen, the US dollar either lost value or remained unchanged against every other major currency. This counterintuitive price action can only be a result of either central bank buying or skepticism about how much longer this dollar rally can last. Technically, the inability of the EUR/USD to break below last Friday’s low has not helped either. A quiet data week ahead makes the chance that the US dollar could resume its prior rally even slimmer. The only major piece of data due for release is durable goods on Friday, but there are 2 wild cards worth watching. The first is oil. Crude prices are hovering slightly above the key $50 a barrel mark. Should it break below that, we could see oil prices spiral lower as stops get triggered, which would also send the US dollar higher. The second is President Bush. He will be giving his annual State of the Union Address on Wednesday. He is likely to pat himself on the back for the improvements in the economy, but without a Republican Congress, it will be interesting to see how he tackles the political and economic landscape going forward.
Excellent article! Thank you for sharing!!! I dod not see the H&D pattern (has yet to be confirmed of course)
This range trading is drivin me nuts. What is it gonna take to make this move either way? (talking about the EUR/USD and USD/CHF)
The data was very good all this week for the US and yet USD/CHF did not break above 1.2550. This leads us to believe that the EUR/USD is headed up .... BUT the overall trend of the EUR is DOWN for the time being.
Another leg down for the Euro? What do you guys think?
Have a fun weekend! I know that I will be looking at season patterns of currency pairs.