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Post by unlawflcombatnt on Jun 30, 2006 12:34:26 GMT -6
Following Bernanke's announcement on 6/29/06, implying he may stop raising interest rates, the stock market, as well as the Gold and Silver markets skyrocketed upward. There was an immediate sharp increase in the Dow-Jones Industrial index, Gold prices, and Silver prices. All 3 jumped sharply around the time of Bernanke's announcement at 2:15 PM on 6/29/06. Below is a graphic superimposition of Gold prices, the DJI, and Silver prices. The time is at the bottom of the Silver chart, and applies to all 3 charts. The black lines on the Gold (top) and Silver (bottom) charts are prices on 6/29/06. (The blue & orange lines on the top and bottom represent previous days' gold and silver prices.) The 6/29/06 Dow Jones Industrial index is in the middle represented by the blue line. My own interpretation is that the stock market went up because of the hope that interest rate increases were over, making it easier for investors to borrow money to invest and for consumers to borrow money to buy goods and services. And again, in my own opinion, Gold and Silver prices shot up due to the implication that inflation would increase, due to a possible end to interest rate hikes. To a lesser extent, gold and silver went up due to an anticipated increase in available investment capital as well. Does anyone have any other thoughts on this, or other interpretations?
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Post by lc on Jun 30, 2006 13:08:10 GMT -6
newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/12/13/intraday.stmThis is the dollar chart from BBC. It shows the dollar fall almost one % in a day, sharply and then tapering. It also shows that the dollar fell against all the other currencies save two. Whatever is happening, Unlawful it is the exact opposite of the sharp fall of the stock market two weeks ago when Bernanke hinted he might raise interest rates .5%. I really am not certain what the real cause of the movements is, but one of my stronger hunches is simply that investors found the dollar to be a safe hedge in a time of collapsing markets. But that idea loses merit when gold and silver drop against the dollar. I am stumped. I think there may perhaps be more to this than the public will ever know. Like central bank derivatives issues that are proprietary and respond perhaps automatically to market triggers. Computer trading of derivatives is what I am refering to. Options specifically. But I dunno. What is interesting is the volatility of the market based on one man's comments and the interest rates. And of course Bernanke's 180.
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Post by unlawflcombatnt on Jul 2, 2006 19:42:07 GMT -6
It appears the market was very encouraged with the part of Bernanke's speech indicating he may pause on interest rate increases, thus not further increasing borrowing costs.
I also noticed from the USD vs. Euro gold prices that the dollar fell about 1.0% on Friday. Though both gold and the DJI went up sharply on Thursday following Bernanke's announcement. Gold continued to rise on Friday, while the Dow declined.
Thursday's and Friday's comparative changes are certainly interesting. I certainly don't have any good idea as to what is happening, following Friday's changes.
It may be that some investors actually responded to the GDP report from Thursday. Though the number was revised upward, the report also showed a decline in Disposable Personal Income, making the amount of personal consumption expenditures financed by debt was much larger than the original estimate. (I'll write more on this later.) Though such a response is "possible," I doubt that it slowed down many overly optimistic investors, who appear to grasp at straws to justify further investment, and ignoring major negatives. (I'd consider the increasing in the fraction of consumer spending financed by borrowed money is a real big negative.)
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