The gold market “is telling us that the Federal Reserve has no inflation fighting credibility.”
– Ralph Preston, Account Executive, Heritage West Financial
“Foreign investors would be foolish to buy US investments knowing that the value of the dollar will decline.”
– Ned Schmidt, Editor, Value View Gold Report
“One thing that should be clear is that the [50 basis point] rate cut was not dollar friendly.”
– Jim McCormick (subscription required), Global Head of Currency Trading, Lehman Brothers
Gold today closed near $740 on the NYMEX.
The euro, on the other hand, rallied strongly against the dollar up to an all time high above $1.40 dollars per euro (chart).
And the US Dollar Index dropped almost another percentage to 78.63.
As I’ve said before, with our huge current account defecit we are dependent on foreign investors buying and holding US assets. Should they refuse or cut back, market interest rates will rise.
This is a problem Helicopter Money.