USD Down, Yields Down, Gold UP!
For two days the USDJPY (see chart) traded in a narrow range 115 50 115.5 and in a shocking development, the yen has gotten very strong versus the USD and we are now sitting at 113.8, a big two hour drop. Gold has traded up over $700, currently at $704.60 and the 10-year treasury has popped so that the yield is a low 4.41%.
What does it mean?
USD
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Update:
Apparently investors didn’t like the jobs numbers. Bloomberg writes:
The U.S. economy unexpectedly lost jobs in August for the first time in four years, increasing speculation that the Federal Reserve will have to reduce interest rates to counter an economic slowdown.
Update:
DJIA opens down big -140. Ian Shepherdson, High Frequency Economics quoted in the WSJ:
Temp hiring fell again, signalling (sic)further broad payroll weakness ahead. One number is not a trend but this will scare the Fed; they will ease [a quarter percentage point] on 9/18 but should ease [a half percentage point]. Remember this report does not fully reflect the market turmoil; worse to come.
Predictions of FED easement should be good right? Wrong! This means the FED was bluffing about fighting inflation. Now they will say to hell with that, we must fight an economy going south. Inflationary and good for Gold, and bad for USD.
Mr. Sheperdson is correct… the jobs number is a another sign of worsening domestic economic indicators. But I am not convinced, however, that the Fed will lower the FF rate this month or this year - I believe the rate will remain at 5.25 as BB makes good on his promise to safeguard the economy, and not bail out investors.
Either way - recession and/or inflation - foreign dollar assets will be dropped at an increasing rate, adding to inflationary pressure (hurting exports) and softening the US equity market. The reign of the $USDollar as the world’s only reserve currency is over. It’s all downhill from here…
I moved all-in on gold at $664-668, and I’m feeling great about it. Next move is a GoldMoney account that sidesteps the $USD entirely… paycheck deposits directly into gold account from which i can pay bills and transact w/o dollars. Perfect. Private gold-backed currency may just be the idea of the decade/century.
Mike P, can you have a [aycheck deposited into the account now?
If you are paid in Europe, as I am now… yes.
They are working diligently to allow US-based DD, asap.
Either way, I am jazzed about removing myself from the $USD economy. The way I see it, it’s the only real vote I have left.
MP