Tuesday, May 29, 2007

Current Account Review

Euro zone March current account surplus 5.4 bln eur vs deficit 3.7 bln in Feb
Tue, May 29 2007, 08:15 GMT

This morning Euro zone economic data revealed a Current Account surplus for the month of March. Following the report, the Euro headed straight up, and the US Dollar straight down. This, in effect, kick started buying in Gold and Silver.

For a quick review of Current Account click here: http://en.wikipedia.org/wiki/Current_account

A nation's Current Account is a major factor in the perception of strength of a nations currency. The United States has a deplorable Current Account Balance presently. To view the list click here: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
To find the United States, simply look to the bottom of the list...it ain't pretty. Just above us is Spain. As noted here previously, Spain has dumped in excess of 80 tonnes of gold on the market as their "foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust." Spain is desperate.

Fiat currencies, like the US Dollar, always experience a currency crisis any time their deficit to GDP percentage reached 4.5%. The United States Current Account deficit is now well over 6%of GDP.

Action to reduce a substantial current account deficit usually involves increasing exports or decreasing imports. This may be accomplished directly through import restrictions, quotas, or duties (though these may indirectly limit exports as well), or subsidizing exports. Influencing the exchange rate to make exports cheaper for foreign buyers will indirectly affect the balance of payments. This can be accomplished by increasing domestic inflation (e.g. by cutting interest rates), loosening monetary policy (making more money available), or adjusting government spending to favor domestic suppliers.

Hmmmm...sounds like the Plunge Protection Team's working thesis. People, if you think the US Dollar is going to recover anytime soon, think again.

If you were drinking beer and hanging by the pool or surf this weekend, good for you. I was at the Coca-Cola 600 in Charlotte. Do yourself a gold investing favor and read the three articles I posted in my last blog up date on Saturday: Weekend Reading . These pieces are of great value to our understanding of today's market mayhem.

Silver Resistance: 12.94 / 13.03 / 13.11

Silver Support: 12.88 / 12.83 / 12.76
____________________________________All prices SPOT

Gold Resistance: 656 / 660 / 663

Gold Support: 653 / 650 / 645

No comments:

Post a Comment