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
In the same category

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 :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
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Peabody(Coal)BTU
Powder River Basin and Central Appalachia Coal Prices Rise
US$ 5.13-8.39%Trend Power :
Corporate news
Barrick Gold(Cu-Le-Ni)ABX.TO
Barrick's 2014 Annual Report and Other Documents Now Available
CA$ 14.21+0.85%Trend Power :
Corporate news
Peabody(Coal)BTU
NYSE stocks posting largest percentage decreases
US$ 5.13-8.39%Trend Power :
Corporate news
Silver Standard(Ag-Au-Cu)SSO.TO
Final Glance: Silver companies
CA$ 6.10-2.71%Trend Power :
Corporate news
Pan American Silver(Ag-Au-Cu)PAAS
Final Glance: Silver companies
US$ 9.13-0.65%Trend Power :
Corporate news
Gold Fields(Cu-Ni-Mo)GFI
Final Glance: Gold companies
US$ 4.37-0.23%Trend Power :
Corporate news
Barrick Gold(Cu-Le-Ni)ABX.TO
Final Glance: Gold companies
CA$ 14.21+0.85%Trend Power :
Corporate news
Condor Res.(Ag-Au-Cu)CN.V
Closes $225,000 Private Placement
CA$ 0.04-11.11%Trend Power :
Financings
Orsu(Ag-Au-Cu)OSU.TO
Orsu Metals Corporation Reports its Audited Annual Results for the Year Ended December 31, 2014
CA$ 0.02+0.00%Trend Power :
Corporate news
Energold DrillingEGD.V
Energold Drilling to Hold Fourth Quarter and Fiscal Year 2014 Results Conference Call on April 13, 2015
CA$ 0.98+0.00%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.