ecoface

Sorry but the IR will only "have" to go up when the market demands.

 

Until then, the BoE want them to be low. It appears that you think that the BoE want them to rise?

 

They absolutely do NOT want them to rise, as they know the damage that this would cause.

 

They believe a weak pound is great for the UK, and inflation (which they secretly want a bit of) will trump potential deflation every time for the CB's.

 

Even with a couple of indicators looking slightly positive, it seems generally agreed that the risks are all still to the downside.

 

That coupled with the looming cuts (many of which have already begun) is forecast to further suppress demand and inflation expectations for a considerable time to come.

 

If anything, there will be more money printing to come.

 

Oh, and I never said anything about "IR's remaining the same regardless of the economic indicators"

JD:

Here's an article about IRs raising:

Telegraph

Then read this:

ArabianMoney

...for a frank view from the middle east.

Yes, I'm sure the fools won't too, but we live in hope.

Okay -points taken.

You say the markets decide - definitely, that is my point too. But it is the capital markets that decide, and the currency traders need to see a strong £ and an attempt to reduce the deficit; that is not achieved by indefinitely low rates. Let's monitor how the £ copes with the BoE's releases this week. Perhaps the £ will rally if IRs stay the same, perhaps not.

I just have a strong view that the BoE is petrified of sterling being attacked by bond vigilantes later this year or early 2011. The capital / currency flows out of £ and lack of confidence in the £ trumps everything IMO. Higher interest rates will keep them away. The June "eturdency" budget kept the vultures away, but only until the Autumn. Then, and only then will we see if these cuts will come through as aired. If the coalition wimps out, which is my view they will, then the £ will bollock out, and so IRs will have to increase to compensate.

Talking of politicians, my guess is that they would rather accelerate the pain, in order to give them a better chance of re-election in 4 years as by then times will be relatively better. The last thing they want is a long drawn out torture.

Have to disagree, your points would signal the opposite to me, or am I missing something?

It depends on whether or not you accept the basic premise which is that they have to go up.

The BoE know this.

Therefore you have to consider when, and what will allow them to do it.

Why don't you try and think like the BoE would about the facts as they currently are and ask if you would leave IRs as they are.

Or put it the other way around to those arguments above: would you raise interest rates when, manufacturing was declining more, when the £ was in a worse state, when cost inflation was lower, and if GDP growth was not as positive. No you wouldn't. How much more positive do the indicators have to be?

If you think IRs will stay as they are regardless of the economic indicators, and that they have to go up to resolve the debt, then there is no point in analysing this further.

But, the rise in IR may not be for a good while yet.

If the BoE was to raise IRs it would be ideal to do it this week. Why?

1) Mervyn King has said that we can expect low IRs for a long time recently, thus softening the market for rises, still claiming that a 0.25-0.5% increase maintains very low rates overall....

2) That Q2 GDP figures were much higher than previously thought so the ideal time to control inflation (see Construction has grown 6.6% which is predominantly in cost-push inflation)....

3) The £ has rallied well since the lows, and so it is the ideal signal to the capital markets that it is good to invest in the £, and it will help maintain the £ rally....

4) Purchasing Managers figures released today indicate that manufacturing is doing well, so an IR increase can be justified without undermining the sector.

To raise would of course be the right thing to do. The BoE has plenty of justification and evidence - will it have the stomache?

The govt WANTS the pain now...

Interesting...

It will be more electable at the next general election if the pain comes quickly, so that the figures have a chance of being positive when electioneering starts. If it delays the pain for 2 years then it stands no chance of getting back in.

Oh right... on the 5 year... from 07....08 to the present looks pretty disparate to me. Gold goes from $1000 to 1200 [20%] while from 500 pounds to 800 [60%]. Wouldn't you agree that shows a lot more "instability in the pound? And that given it went up so much against the pound, a decent correction similiar to last time wouldn't be unusual.

Yes, I expect the fall to be amplified in GBP terms.

Touche!

 

But what happens in the market action of one day doesn't really translate into longer term trends.

No, but on the same graph, click on 30 days, then 60 etc. etc. Okay, so the Y axis is different, but it's not that different.

The gold price is a lot more volatile in pounds. This is more about the pound than gold. Gold priced in Yen and US dollar shows these currencies to be more stable... though still depreciating against gold.

I kind of agree but look at this...

Looks fairly consistent to me.

GBPUSDGoldComparison

I have a support at 770, which is it's current level and it doesn't look good if it goes through.

Gold GBP not looking good at £760.

Next move down to 200 dma at 737. If it fails to hold there, then there is not much to stop it falling way back to 625 - we need panic in the equity markets in the next few weeks to stop gold bombing out.

Anyone got an idea why gold bombed down 1.4% today in GBP terms?

I have a support at 770, which is it's current level and it doesn't look good if it goes through.

Well, I put about 20% of my STR funds into GM which wasn't enough as I left it too late and exited too early. I hold only about 10% right now but intend to spend more.

About 30% was loaned to my company from which we made more than 10% compound growth at least.

The rest has been split in pathetic interest accounts and stocks the latter of which have been poor since 08.

When you compare RPI and CPI at 3-6% it doesn't look that good.

If my spheroids were made of metal I would have put the lot into gold.

As it was I took a massive gamble with our families lives which right now looks about 50/50. I don't think I have lost as I feel liberated by not owning and can exploit markets when I choose.

My gain in 3 years on investments, loans, PMs, equities and interest has averaged out at c. 7% of total capital overall. (After applying inflation this looks mediocre).

But my rental during this period has been about £25k more than my mortgage was over 60 months.

To cut a long story short, it all looks a little plain Jane doesn't it.

Nothing to get too excited about. Has it been worth it - we'll see by next Spring.

In the meantime if the damn EMs crash then the picture improves!

Interesting...

The house we sold in Summer 2007 at £430k, has just gone back on the market for exactly the price we marketed it for back then at £450k.

The buyer has incurred legal fees, stamp duty and made some improvements on the house, so he will probably be out of pocket unless he gets the asking price at £450k.

It is a little frustrating because in the last 3 years I could have stayed in that house, and not rented; my rent is more than my mortgage was. If he gets in excess of £420k then I have made a big mistake selling in summer 2007.

The reality is that the funds from my sale haven't made that much either for me to be able to stand up to my wife and say it has been worth living out of boxes for a few years!!

I have a large number of air-tite coin capsules with a 22mm fitting inner ring that will keep your sovereigns safe from spot rust. I do not trade in this but am just trying to sell them on at cost as I bought a large number a year ago. They are all brand new and have never been used. I can let anyone have 10 for £5 including rings and postage within the uk. Please email thomas.e.shaw@hotmail.co.uk if you would like me to send these to you. I will need a bacs transfer in advance of shipment.

I wouldn't go fishing around here for peoples home addresses in case you might want to know where coins are located outside of banks. I heard a nasty story about 2 years ago where an old couple gave their address to someone on a forum about coins, only to be held up at gunpoint a few months later. Not saying you're of that frame of mind, but best to be on the safe side eh.

I see you point, but BDEV was the best indicator up to that point, and was the one that I referred to in the 2009 Podcast. So into that way, I am stuck with it, if I am updating those discussions.

 

Has anyone listened yet?

Can you poss see if CC will allow it to be added to FBB so that it can be auto'd via itunes library? You will also get more hits I reckon.

Bubb,

You should not use BDEV when using longer term charts because they diluted their shares massively last year you will recall.

I would strongly suggest you use Persimmon, Taylor Wimpey and Berkeley Homes instead.

Otherwise it undermines your argument.

Just thought I'd offer that.

Now here's one that the gold bugs will find hard to interpret as some of them think GS manipulates the market. Conversely, some will no doubt see this as a sign to go short, as whatever GS say publicly, they then position themselves for the opposite.

LONDON (MarketWatch) -- U.S. investment bank Goldman Sachs Group Inc. Thursday raised its 12-month forecast for gold by a modest 1.5% to $1,355 a troy ounce, citing a prolonged period of low interest rates and persistent concerns over European sovereign debt.

Goldman said it still believed gold prices will decline beyond 2011 once the U.S. Federal Reserve tightens monetary policy and recommended producers consider selling their production forward.

The bank raised all its forecasts for base metals except for zinc, which it slashed by 18% to $2,225 a metric ton.

Slowing growth in Europe and China, as well as strong Chinese zinc production, will keep the market in surplus longer than expected, it said.

Goldman said copper remained its favorite metal for long positions as inventories continue to decline and the supply deficit should grow this year and next.

Goldman raised its silver forecast 1.3% to $22.60/oz, largely due to its improved outlook for gold.

Gold in GBP is now lowest its been since mid May at £790.

I think it's only fair to post this. Ker's thoughts from 14th October 2009. $300 gold.... As if...

To be fair to him, I think the shape and pattern is good, but the timing is out. The Head and shoulders pattern you could arguably contend topped out at around $1250.

This looks sensible to me though:

It will be interesting to see how Gold reacts today and tomorrow as Greece returns to the capital markets today. It plans to auction treasury bills for the first time since the bailout in May.

LONDON (MarketWatch) -- The Greek government on Tuesday tested the debt markets for the first time since tapping a European Union-International Monetary Fund bailout plan, selling 1.625 billion euros ($2 billion) of 26-week bills, news reports said. The auction produced a uniform yield of 4.65%, up from 4.55% in an April auction. Reports said the amount of bids received exceeded supply 3.64 times, down from 7.67 in the previous sale.

...a surprisinly good take up of their treasuries. Bull fodder.

Confidence in printy printy. POG likes this.

It will be interesting to see how Gold reacts today and tomorrow as Greece returns to the capital markets today. It plans to auction treasury bills for the first time since the bailout in May.

It seems to me that there has been an increasingly large amount of bearish reports in the last 4 weeks on POG from traders, investors, financial media etc. Indeed there are so many, this is now the mainstream or groupthink.

By definition, you are contrarian if you think the opposite, in that POG will take-off again.

Now, ask yourself, if you are genuinely a Contrarian thinker, is it because they all have it wrong, but weirdly had it right when on the last medium rally?

I sold 75% of my gold fund when at c.£850 last week (or was it the week before).

I personally think that POG in £ will tank if IRs tick upwards.

Now that is Contrarian, for those of you who are now going against the mood for POG in $.

Builders stocks making nice new c.12 month lows.

Surely the leading indicator is shouting the new downward phase now?

Gold in GBP is getting hit hard today - down over 1% already.

For the first time since 6th May, gold in GBP has shown weakness relative to in USD. In GBP terms gold was outpacing in USD terms.

This change co-incides with a rallying GBP since about midnight last night.

Anyone got any idea why the relative confidence in GBP in the last 12 hours? In GBP terms gold has dropped from 845 to 834.