In the early hours of Thursday, December 6th, 2007 the Bank of England and the European Central bank will decide if a change in their prevailing interest rates is necessary. It is expected that both will keep their rates unchanged. The same was believed in Canada before the surprising cut in interest rates there on December 4th.
The Canadian Central Bank [CCB] cut rates in an effort to come to the rescue of Canadian Exporters getting crushed by the strength of the local currency vs. the floundering US Dollar. So, in an effort to weaken the Loonie relative to the US Dollar the CCB choose to cut interest rates. European Exporters have been up in arms over the "strength" in the Euro and how this strength has eaten into their profits because of the dismal exchange rates. The answer: devalue the local currency by cutting interest rates.
The race is on now to cut interest rates globally to "rescue" local currencies from the weakness in the US Dollar. This global gutting of local currencies will only exacerbate an accelerating global inflation. The effect of these interest rate cuts will also create a bid for the US Dollar, as strange as that may seem. It will be temporary.
What has Gold done since the Fed began cutting interest rates back in September here in the States? It has risen. Why? Because interest rate cuts create liquidity. Excess liquidity creates inflation. Inflation creates a rising Gold price...IN ALL CURRENCIES.
The entire planets system of central banks are now intent on devaluing their currencies to keep their exports competitive in the global economy. This action will only create a demand for Gold in ALL currencies.
At 5AM est. on December 4th, the European Union reported a surprising increase in their PPI. Global inflation rears it's ugly head. This report immediately translated into a rise in the price of Gold. Gold quickly rose over $10 following this report, and tacked on another $5 that same morning when news of the surprising Canadian interest rate cut hit the wires:
U.S. woes hit home as Bank of Canada cuts rates
The ubiquitous Gold Cartel has been falling all over themselves since to keep the price of Gold contained. They know all to well of the buy-stops sitting at 807. They know all too well that if Gold breaches the line at 807 the horses will have left the barn.
Don't be misled by the Gold Cartel PR of the past 48 hours that implies that the Dollar has bottomed and that Gold is going to collapse in 2008. Nothing could be further from the truth. The world's credit crisis has not been solved...it has only just begun. Five of America's largest banks are a cat's whisker away from destruction...and nobody will admit it. The Fed could drop interest rates to ZERO, and it would not fix anything...only make things worse.
OPEC scoffed at the suggestion that they increase production. The PPT has lost a key ally in their manipulative cog. OPEC is tired of being lead around by the nose by the USA and their worthless Dollars. Not only has OPEC ceased to "pump more Oil on demand", they have ceased purchasing US Treasuries. China has ceased purchasing US Treasuries as well. The Dollars fate is sealed. A global economic time bomb is ticking...an implosion of the US Dollar is imminent...financial mass destruction is assured. Buy Gold and Silver now...while supplies last.
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