The interest rate dilemma
Market speculators have lost sight of the fact that interest rates will continue to rise and that the US Government is irretrievably bust, making the fiat dollar ultimately worthless.
Yesterday, US CPI figures came in a little hotter than the market had discounted. I take the view that this is the sort of debate theologians are said to have had about how many angels could dance on a pinhead — a distraction from the real issues.
Gold was marked down by nearly $30, and silver by 40 cents or so. But then gold had been rising spectacularly, and speculators were in for the ride. As you can see from the chart, after its recent performance a reaction in the price was hardly surprising.
The other side of the hedge fund trade is the dollar. And after recent falls, that had a minor bounce to test what has become overhead supply starting at 103 on the trade weighted index.
Furthermore, the yield on the 10-year UST note saw a bit of a bounce.
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