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theo
Penny Hoarding Member
USA
588 Posts |
 Posted - 06/08/2009 : 12:48:57
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You Can't Always Get What You Want
By Jon Nadler
Jun 8 2009 11:44AM
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Good Morning,
The US dollar continued to recover as the new trading week got underway overseas last night. Much of the greenback's comeback was linked to perceptions that the Fed will perhaps commence hiking interest rates as early as the final stretch of this year, in an effort to stave of inflation as the economic turn of the USS US battleship gets underway. The dollar was also seen receiving a boost from the downgrade of Ireland's sovereign debt credit rating, and it easily advanced against the pound and the euro.
Whilst crude oil did not undergo any significant declines, the shift in sentiment has been fairly clear among participants since late last week; the latest commodities moonshot has run into trouble. Or, to put it in other words, it was once again too early to start to compose a eulogy for the US dollar. Interestingly, here at the Vancouver World Resource Conference, we have not only heard the old "dollar death-watch" story being repeated by fewer ultra gold bulls, but a new formula was also being offered for a change: one that allows for a tandem rise in the value of gold and the greenback.
In so many words, several hitherto staunch dollar morticians have admitted at this Cambridge House show that their least favorite currency is here to stay, and annoy some more. Even if such resilience 'makes no sense' and must surely be the result of some kind of behind-the-scenes 'funny' goings-on. Right. Has the recognition that the US dollar's reserve status still has no viable, ready, and willing replacement candidates in the wide world of currencies seeped into perma-bull consciousness? Doubtful. But, hey a new angle will keep the critics at bay. For a while.
Whatever it takes, just as long as it's a rise they are able to talk about. Whatever it takes. On at least two panels last night, the backing away from the $1K level was being painted as having been 'inevitable' given the swiftness and angle of the advances in May. Funny, perhaps with one exception, we do not recall having been offered caution signals from the REGB camp in those weeks. We did note (as did the contrarian sentiment indicator vane at Marketwatch) the 'here we go' chants on the other hand. All of them.
Following last Friday's rout, gold prices continued to slip lower once again this morning, and edged closer to the low $940s on the back of the aforementioned conditions in the currency markets. Friday slide came on the heels of better-than-expected employment figured and economic recovery optimism. At this juncture, safe to say that the four-digit barrier's penetration might have to be placed on hold, at best, if not on the back-burner altogether. The present tendency is to clear out weak hands and try to do so perhaps as low as the $930s - as a first objective.
As for the above-mentioned economic turnaround, well, President Obama was cited as having said that the US has a long way to go on its road to recovery. This, as he announced ten projects designed to either create or preserve some 600,000 jobs in the USA. The country's unemployment level stands at 9.4% and although there is some evidence of a slowing in the rate of jobs being shed by the economy, the current rate of joblessness remains above targets as well as very "visible" for the new administration.
Econ guru Nouriel Roubini on the other hand, dismissed the 'green shoots' concept and warns of 'complacency' as this stormy period now enters a new phase. Yale University's Robert Shiller (yes, that Shiller) opined that US housing prices may continue to decline 'for some time.' This, following a 32 percent cave-in that has been observed in same through March of this year, since the lofty heights reached in July of 2006.
As for the rest of the world and its condition, well, there remain plenty of hurdles left. Including some in China - a place which, according to Van City show mythology- is supposed to offer true salvation for the world of commodities from now until...forever. Except for little hiccups such as those reported this morning in a Bloomberg piece:
"First, China’s goal of securing resources to fuel its rapid growth is experiencing some setbacks. The collapse of the deal with Rio Tinto, the world’s third-largest mining company, is more than just a blow to a state-owned aluminum producer. It’s a humiliating wallop for cash-rich China. Its assertions that Rio Tinto was a purely commercial exercise never gained traction.
China is ground zero for one of modern history’s greatest resource grabs. Massive investments in Latin America, Africa and Asia have delighted many politicians anxious to revive economic growth. In more developed economies, though, China is hitting its share of resistance or misfortune.
And then, of course, there’s China’s $768 billion of U.S. Treasuries. Any major drop in the dollar’s value will leave China’s government with huge losses. For all the chest-thumping in Beijing about how China has leverage over the U.S., there’s little China can do but hope for the best.
Second, the role of falling commodity prices, frozen credit markets and tepid demand for asset sales can’t be underplayed where Rio Tinto and Chinalco are concerned. Global trends are undermining the valuations of both companies. All this talk of “green shoots” in markets and economies won’t amount to much if financial systems don’t return to normal. Once they do, the world needs to contend with central banks removing the vast waves of liquidity they pumped into markets over the last two years."
While China is out there trying to secure a clear path to a number of vital commodities, foreign operators are not standing still, either. Many a firm has a sharp eye on developing China's numerous (potentially 10,000) gold deposits. A production bonanza in the making. It is only a question of whether all of this gold coming down the production pipeline will find a home inside the country. As of now, and as of today's output levels, this is not an issue. Too early to tell what happens when the tap is fully opened.
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 06/08/2009 : 13:04:55
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| I gave Nadler a chance because I wanted a contrarian view of the dollar, inflation and PMs; but unfortunately I came away with very little. Instead of giving any real insight, Nadler seemed content to reval in the percieved frustration of gold bulls that gold is still in the 900s and the dollar is still standing. Thats great John. I'm happy for you. However instead of making snarkey comments about PM bulls, why don't you try to address thier underlying concerns; like how we are going to pay back an 11.3 trillion dollar debt, not to mention trillions in unfunded liabilities. |
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Nadler: You Can't Always Get What You Want
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