| Ratios and Correlations
Dollar and Gold
Interest Rates and Commodities
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There are some basic rules for investing in resource stocks, which
are very important to follow:
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Resource stocks will rise after a period of worldwide low interests and
a weak dollar.
-
The period of low commodity prices is over when interest rates start to
rise (= money supply decreases). Gold has been a leading indicator
for rising interest rates so far. As intervention from Central Banks has
been strong in the last years, the gold price is rather a lagging indicator.
Palladium and platin, which are fixed in rather free markets took now the
role from gold as leading indicators.
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Commodities and resource stocks are strong, when the world economy is strong.
-
World economy and US economy are adversly correlated i.e. when the US economy
is fine world economy is slow. The weakness of US is the strength of the
rest of the World and vice versa. The reason is that many bonds are issued
in dollar, so that the repayment of dollar denominated debt is harder when
the dollar/USeconomy is strong
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