By Bill Cara –
Today’s “surprise” in the global capital markets occured when the International Monetary Fund (IMF) played their ace card. Actually it was a misplay for the simple reason that capital market investors are a really smart group and are in control.
That’s what happens when governments print so much worthless paper they call currency.
So today the IMF tried to reverse the fall of the USD by saying oil prices would come down and global economic growth would also fall short of estimates. Well, if you think it through, aren’t these two factors offsets?
For example, lower oil prices will actually give a boost to global economic growth, just as the $50+ price was slowing it down.
But, like throwing mud against the wall, the IMF did whatever it could to rally the USD, and for a couple hours the ploy worked. But not for long.
Serious investors will not let go of the fact that (i) the G20 inaction this weekend and Greenspan’s legitimate comments on Friday will actually help the declining USD fall further, which is probably U.S. policy at this point despite what the GWB administration says, and (ii) PPI/CPI data out of the U.S. last week was a shocker, and is a strong indicator of rising U.S. price inflation, for which the offset is a weaker USD.
So, after the initial kick from the IMF, capital markets simply got back to business. Technicians calling for a turn in the USD here are just standing on the tracks in front of the oncoming freight train.
Gold set new highs at $449.00 (up $2.00) and other USD-denominated commodities, excepting the energy complex for now at least, also acknowledged the trend of U.S. price inflation.
Barrick Gold (NYSE: ABX), Placer Dome (NYSE: PDG), Meridian Gold (NYSE: MDG) and Newmont (NYSE: NEM) all were well up on the day.
Tomorrow, I think NEM holds the key. It needs to get through resistance at the $50 level in order to carry the rest of the group higher.
One group of market players who weren’t fooled by the IMF today was that junior TSE and TSE Venture Exchange-listed list of stocks that TW Networker MH wrote up yesterday. Have a look at some of the price changes in this group today, and that follows a strong day Friday.
At this point, I’m going to go along with Greenspan who says interest rates are going up — because I know they are going up for a reason, not because he wants them to go up. You see, I’m hanging tough with that reason, or shall I say reasons: government spending deficits, debt, trade imbalances, and the rising PPI/CPI trend.
I’m just going to ignore the IMF. After all, they had an axe to grind today, and they swung it. We stepped back — for the moment. Now, it’s time to move in for the kill.
I believe that had the IMF not played their card today, with oil prices also off, that gold would have moved up well over $450 today. It just might tomorrow, and if not, then Wednesday.
Even that turkey is going to take on a certain glow this weekend, I believe.
Source: Trader Wizard Perspective