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The Daily Reckoning

Gold rises as US interest rates stay down

Gold rises, along with the euro and Australian dollar, after the S&P downgraded its outlook on the US. Gold rises above $1,500 and silver is trading above $44.

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With the rise in the price of oil, the “petrol currencies” of: Canada, Norway, UK, and even Mexico (with their depleting oil reserves) get an extra boost against the dollar. So… it’s an all-out rout on the dollar this morning… It’s like the overnight markets ambushed the dollar, captured it, and are now holding it captive!

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The Canadian dollar/loonie (CAD) got an extra boost after their March inflation rate jumped to 3.3%! Looks like the Bank of Canada (BOC) is going to have to come back to the rate hike table sooner than they had previously thought! I really think that the BOC needs to get their heads on straight here, since they had backed away from the rate hike table, not wanting to attract attention to the loonie, as they didn’t want the currency to get too strong… But I would think that rather than not wanting to see the currency appreciate, that the BOC needs to accept a stronger loonie, and let it do some of the work of holding down inflation pressures… Look, if oil is going to remain above $100, and food prices continue to be more than “transitory” (as our Big Ben likes to say), inflation is going to remain a problem for the BOC and the Canadian people… So, go ahead, and accept a stronger loonie, BOC, you’ll be happy you did!

I guess that old kiss of death that I put on things from time to time, didn’t last too long for the New Zealand dollar/kiwi (NZD)… Yesterday, I was disappointed to see kiwi slip after talking about its steady rise in the past month… But today, kiwi has touched 80-cents… The last time kiwi was above 80-cents was three years ago! Kiwi’s high was reached in February of 2008, topping out at 0.8214… So… If kiwi is to return to its previous high, it still has a ways to go, eh?

The fact that the earnings season has been pretty good so far is weighing on the dollar, this morning, which should be good for the US… But markets are taking it as reason to rally versus the dollar, on the “boost to risk sentiment”… So… In that vein, today, after the market closes, Apple will announce first quarter earnings… If the “risk sentiment” is to remain, and continue to put pressure on the dollar, Apple’s earnings will need to be strong.

Portugal and Spain were able to auction bonds this morning without major problems, which is a good sign for them, and for the euro. So, watch for this, folks… Today or tomorrow we’ll see the media refocus on restructuring Greek debt, to take the heat off the dollar…

Yes, I don’t like being so cynical, but what can I do? I see it every time, and it’s so blatant! Of course, my beautiful bride would probably tell you otherwise… HA! But think about all this for a minute… I just call them the way I see them, and if that’s being a Smart-A** or cynical, so be it!

Not that too many people noticed it… But I left three zeros off my reporting of the National Debt yesterday… But we all know it’s $14+ TRIILLION at this point, and going up every second. But I do agree that when someone sees $14 trillion, they get the picture better if they see it as $14,000,000,000,000 … It makes one think about it a little more, rather than just saying $14 trillion, and letting it roll easily off the tongue…