Interest Rates,

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  • Interest Rates,

    Interest Rates Hikes (effect on Currencies & Gold)





    When a company raises its dividend, its stock becomes more attractive to investors. Its share price rises. When a bank raises interest rates on its savings accounts, people deposit more money in the bank. It's the same way in the currency markets. Rising interest rates make a currency more attractive and it rises against other currencies with stable interest rates. Central banks around the world have been cutting rates for two years, and interest rates are as low now as they've ever been.

    The governor of Australia's central bank hinted there would be more interest rate rises on the way. This could be the start of a new trend of rising interest rates around the world. If this is the start of a new trend of rising world interest rates, you can expect big new trends in the currency exchange markets, too. That's because interest rates are the single most important driver of exchange rates in the currency markets.

    So how do we make money from a new global trend of rising interest rates?

    While other central banks are considering raising rates, the Fed has so far refused to join the party. The dollar is the worst-performing major currency in the world this year as a result.

    The recent unemployment report showed that somewhere close to 6 million jobs have vanished from the American economy in the last 18 months. The employment situation hasn't been this bad. With the ongoing unemployment, rate hikes in America are unlikely until next year.

    First, this gives us a great opportunity to buy the dollar right now, while it's cheap and no one is anticipating rate hikes from the Fed. By the time Bernanke announces his first rate hike next year, the dollar will have already rallied 10% or more.
    Second, a trend of rising interest rates on currencies is great for people looking to buy gold at lower prices. Gold has no interest rate. So when interest rates rise on world currencies, they become more attractive – and they rise – relative to gold. This is especially true with the dollar. It's the world's reserve currency and gold is incredibly sensitive to movements in its interest and exchange rates.

    As long as unemployment keeps rising, there's no way the Fed raises interest rates and gold prices will stay high. But next year is a different story. The first hint of rate increases by the Fed will send shockwaves into the gold market.

    Regards:
    Mark04
  • Karel
    Administrator
    • Sep 2003
    • 2199

    #2
    Posts like these make me suspect a cut and paste job and make me interested in the posting history of the poster elsewhere on the net. The result of that curiosity is fairly predictable, but a check doesn’t take that much time.

    The result was that mark04 gets banned for his cutting-and-pasting. He will cut and paste a lot more and will never engage in a discussion. And he has some more names to choose from, like anand04 and vivek04. And he posts from Pakistan (that means probably: via a proxy server in Pakistan)! How stupid does he think we are?

    Regards,

    Karel
    My Investopedia portfolio
    (You need to have a (free) Investopedia or Facebook login, sorry!)

    Comment

    • steelman
      Senior Member
      • Jun 2008
      • 648

      #3
      Great Job Karel! Keep us safe and free from all evildoers.

      Thanks,
      Steel
      Best,
      Steel
      It's time to Grab the Bull by the Horns!

      Comment

      • mrmarket
        Administrator
        • Sep 2003
        • 5971

        #4
        See? Any joker can start an investment forum. But they won't have Karel to protect him. He is beyond amazing. He is HUGE.
        =============================

        I am HUGE! Bring me your finest meats and cheeses.

        - $$$MR. MARKET$$$

        Comment

        • Websman
          Senior Member
          • Apr 2004
          • 5545

          #5
          Originally posted by mrmarket View Post
          See? Any joker can start an investment forum. But they won't have Karel to protect him. He is beyond amazing. He is HUGE.
          Agreed. Karel is amazing!

          Comment

          • steelman
            Senior Member
            • Jun 2008
            • 648

            #6
            Originally posted by mrmarket View Post
            See? Any joker can start an investment forum. But they won't have Karel to protect him. He is beyond amazing. He is HUGE.
            Ernie,

            Speaking of huge, you will appreciate this. I started working out again. Well, I have always tried to maintain throughout the years, but I was finally able to string together some workouts. 11 workouts in the last 4 weeks. Today I benched 285, 12 times in my final set. A long way to go from my younger days, but not too bad for an old man. Ha, I even put on 5 pounds and I am hoping some of it is muscle.
            Best,
            Steel
            It's time to Grab the Bull by the Horns!

            Comment

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