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So what will this do to metals?

Started by jtryka,

17 posts in this topic

gmarguli

gmarguli

Posted
Posted

Who cares? Do you think this will prevent those people looking for the safest investments from buying? Think China will stop buying? The only thing this does will create a minor inconvenience for fund managers who have to have a AAA average rating for their holdings.

 

Hopefully the markets tank on Monday as that will be a nice buying opportunity.

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jom

jom

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Canadian Minister Jim Flaherty tells Canadians to brace for economic troubles on Monday due to S&P downgrade in the United States.

 

http://www.cbc.ca/news/politics/story/2011/08/06/pol-us-credit-flaherty.html

 

Economic troubles on Monday? What about Tuesday or Wednesday? lol Nothing like a little bit of overreaction.

 

omg.gif

 

To me it's just going to be a buying opportunity....so let's have it!

 

jom

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jtryka

jtryka

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Yes! Buying opportunity! I am heading out to the supermarket to buy some canned goods! lol After all, you can't eat gold, or silver, thought I suppose you could have eaten Treasury bonds before then were completely converted to electronic registration...

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World Colonial

World Colonial

Posted
Posted
Who cares? Do you think this will prevent those people looking for the safest investments from buying? Think China will stop buying? The only thing this does will create a minor inconvenience for fund managers who have to have a AAA average rating for their holdings.

 

Hopefully the markets tank on Monday as that will be a nice buying opportunity.

 

As long as China runs a trade surplus with the United States, they either have to buy USD assets or someone else will end up with them. But the rest of the world as a whole has to accumulate USD assets whether they want to or not. It is simple math. The only unknown is what the return (interest rate for bonds) will be.

 

If US trading partners do not want more USD, then they will be forced to shrink their trade surplus or eliminate it completely. That would be likely much worse for these other economies than it would be for the US, which is why it is unlikely to happen voluntarily.

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World Colonial

World Colonial

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This news is actually pretty dire. Augustus

 

The long term fiscal position of the US is dire but that has nothing to do with this downgrade. The S&P action is irrelevant. Given the dismal record of these agencies in acting as an early warning for anything, there is no reason to pay any attention to them at all.

 

To give you some absurd examples, Enron was rated "AAA" up to a few weeks before it collapsed in late 2002. They also rated toxic MBS "AAA" prior to the real estate crash in 2008.

 

In terms of sovereign ratings, Japan lost its "AAA" years ago yet its yields are lower than the US and every other country. While most of its debt is locally owned, that only goes to prove that locals do not care about the rating.

 

The only rating that really matters is the one given by the buyers of the debt which is reflected in the interest rates they will accept. The vast majority of the time, financial stress is signaled through rising interest rates before any downgrades ever happen. That has also happened in the EU crisis most recently with countries such as Greece and Ireland.

 

The US should have been downgraded, along with at least some other "AAA" rated countries such as the UK, years ago.

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MarkFeld

MarkFeld

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This news is actually pretty dire. Augustus
Dire or not, (and I don't think it is), I am under the impression that the announcement was not much of a surprise.
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MarkFeld

MarkFeld

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This news is actually pretty dire. Augustus
Dire or not, (and I don't think it is), I am under the impression that the announcement was not much of a surprise.

 

Mostly, it is dire, because many funds require AAA rated bonds ONLY in their portfolio. Anything less than AAA, would have to be liquidated.

 

It may also raise borrowing rates for the United States, and force the Federal Reserve and Treasury to purchase more bonds.

 

Additionally, the downgrade has done a lot of technical damage to the charts as the Dow Jones has fallen below it's 40MA and is now in full-on bear market mode.

 

I am interested to see if gold and silver follow the Dow down, or if they move in the opposite direction.

 

Augustus

The technical damage occurred BEFORE the downgrade. ;)
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jackson64

jackson64

Posted
Posted
This news is actually pretty dire. Augustus
Dire or not, (and I don't think it is), I am under the impression that the announcement was not much of a surprise.

 

Mostly, it is dire, because many funds require AAA rated bonds ONLY in their portfolio. Anything less than AAA, would have to be liquidated.

 

It may also raise borrowing rates for the United States, and force the Federal Reserve and Treasury to purchase more bonds.

 

Additionally, the downgrade has done a lot of technical damage to the charts as the Dow Jones has fallen below it's 40MA and is now in full-on bear market mode.

 

I am interested to see if gold and silver follow the Dow down, or if they move in the opposite direction.

 

Augustus

 

I never quite understand your logic Augustus that gold will drop if the Dow drops significantly...I'm thinking we may see $1700 an ounce by the time trading closes on Monday---people want secure and tangible assets...I could be wrong..maybe my logic is skewed and you're right......

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