Expectations for future inflations are best reflected in bond rates and not in gold prices.
10yr Bond rate has fallen below 4.5% again after hitting a major resistance at 4.7%.
The falling long term rate has spurred rallies in homebuilding stocks. BZH made a new high recently; DHI and KBH have broken out from the downtrend channels; only TOL is still stuck in the negatives due its "bubble" susceptability.
It's important to note that both dollar and gold made new highs recently, there must be fundamental reasons for investors/speculators to accumulate them. The rise of dollar can be explained by a loose fiscal policy (budget deficits create lots of supply) and a tight monetary policy (higher yield than anywhere else spurs lots of demand).
But the rise in gold has reasons other than inflation:
1. Anticipation of demands from China and India, this is the same excuse used by oil speculators.
2. Anticipation of major political instability. The recent breakout of gold coincided with Iran restarting its nuclear reactor. The biggest ever spike in gold price coincided with Iranians taking American embassy hostage.
3. Gold is not a very big market, only a tiny fraction of the money circulating in the oil, real estate or the stock market can move the gold prices big times. Therein lies the chances of speculators.
10yr Bond rate has fallen below 4.5% again after hitting a major resistance at 4.7%.
The falling long term rate has spurred rallies in homebuilding stocks. BZH made a new high recently; DHI and KBH have broken out from the downtrend channels; only TOL is still stuck in the negatives due its "bubble" susceptability.
It's important to note that both dollar and gold made new highs recently, there must be fundamental reasons for investors/speculators to accumulate them. The rise of dollar can be explained by a loose fiscal policy (budget deficits create lots of supply) and a tight monetary policy (higher yield than anywhere else spurs lots of demand).
But the rise in gold has reasons other than inflation:
1. Anticipation of demands from China and India, this is the same excuse used by oil speculators.
2. Anticipation of major political instability. The recent breakout of gold coincided with Iran restarting its nuclear reactor. The biggest ever spike in gold price coincided with Iranians taking American embassy hostage.
3. Gold is not a very big market, only a tiny fraction of the money circulating in the oil, real estate or the stock market can move the gold prices big times. Therein lies the chances of speculators.
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