Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

U.S. Dollar, Gold Implications of Election

IMG Auteur
Published : November 12th, 2012
333 words - Reading time : 0 - 1 minutes
( 5 votes, 3.6/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
FOLLOW : Eurozone Gold

 

 

 

 

Alia iacta est! As networks projected an Obama victory, there was a sea of red: the dollar is down versus currencies and gold. As pundits will shift the focus on the fiscal cliff, the market appears firmly focused on what may be more relevant: an Obama win favors a continuation of the current easy money policy. Had Romney won, Fed Chair Bernanke would have become a lame duck, undermining the credibility of the Fed's commitment to keep interest rates low way beyond the end of Bernanke's term in early 2014. With this uncertainty removed, the Fed's increased emphasis on employment is here to stay. The market rewards this certainty by bidding up gold, selling off the dollar versus all major currencies.


We don't believe the fiscal cliff is similarly important: in our "worst-case" scenario, the "cliff" will take place; however, once tax increases and spending cuts have taken effect, Republicans may then agree to cut taxes, thereby keeping their promise not vote for tax increases. While the drama may be worth watching, the market impact may be limited. Note, though, the budget deficit would still exceed 3% before factoring in an economic slowdown. Yet, we won't have come a step closer to entitlement reform. Entitlement reform is unlikely to happen, as we believe the only language policy makers listen to is that of the bond market.


Keep in mind, however, that testing the patience of the bond market in the U.S. might be more dangerous than in the Eurozone: the U.S., unlike the Eurozone, has a significant current account deficit. To a significant extent, foreigners finance the deficit by buying U.S. bonds. Should the bond market impose reform on policy makers in the U.S. by selling off bonds, the implications for the U.S. dollar might be far more severe than they have been for the euro.


As we all hope for the best, we would like to point out to that hope is not a good policy, neither for politicians, nor for investors.



 

 

<< Previous article
Rate : Average note :3.6 (5 votes)
>> Next article
Axel Merk is the President and CIO of Merk Investments, manager of the Merk Funds. An authority on currencies, he is a pioneer in the use of strategic currency investing to seek diversification. Axel Merk is a sought after speaker and author on topics ranging from the economy, gold and currencies to sustainable wealth and personal finance, as well as a regular guest and contributor to the business media around the world. Mr. Merk manages the Merk Hard and Asian Currency Funds and co-manages the Merk Absolute Return Currency Fund and the Merk Currency Enhanced U.S. Equity Fund. He holds a B.A. in Economics (magna cum laude) and a M.Sc. In Computer Science from Brown University.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Gold coins: the United Kingdom´s...
08 Decflup
I think that Estonia is VAT free for legal tender silver.
The Deepening Deep State
03:24Jim C.
Kunstler wasn't concerned about 'The Deep State' when he voted for Obama...since Obama's agenda seemed to coincide initially with Kunstler's own. ...
Documents Prove Massive Rigging ...
09 DecThe Recusant
Yes, yes. the PMs are manipulated. Perhaps some bank will have its wrist slapped. Then everything will return to normal. More price fixing and bank...
Silver Demand Ready To Explode
09 DecThe Recusant
Sorry Andy, but I don't believe in Santa anymore either. Believing silver "must" explode is no different than the market "must" implode. I've been ...
Guest Post: How to Trigger a Sil...
09 DecThe Recusant
Well, there you have it. Blatant manipulation and cover up by the CFTC and DOJ. So, what else is new? Let's see what Trump will do to stop this! [s...
Indian demonetization effect: 15...
09 DecJ T.
From reading the comments at the end of the article mentioned above in economictimes.indiatimes, the people who read it, if they actually did, are ...
India Confiscates Gold, Even Jew...
09 DecJ T.
Hopefully the naive, or ignorant, or worse, willfully ignorant, who have swallowed (once again) the MOP's lie (that's the Ministry of Propaganda......
The Rediscovery of Men
07 Decaccording-1
and now bernie has a brand new house. i smelled that the fix was in when he said he was running against filthy hillery. then at the perfect moment...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS