Also In Today’s Letter…

• No One Wants to Listen to Volcker?
• “Gold Will Hit $1,000 in Three Months”
• Why Are Some Currencies Immune to Job Losses?

By Chuck Butler Day One at the Orlando World Money Show (WMS) went well. My room for the presentation was packed! It was standing room only, and the good part was the fact that there were only about 30 of my readers in the crowd, so I had plenty to convert!

Today, the Central Banks of England and the Eurozone are meeting to discuss rates. As I’ve said before, I truly believe the Bank of England (BOE) will cut rates aggressively once more to bring their internal rate to 1/2% or 50 BPS, just like here in the U.S.

The forecast is for the BOE to cut to 1%, but I’m going out on that limb and saying they’ll be even more aggressive. Here’s the thing that just gets my goat about this. The more aggressive the BOE is in cutting rates, the better the pound sterling will trade. Now this should be the opposite, as a rate cut is a true debasing of one’s currency. But the mental giants in today’s trading world don’t see it that way. They see it as a plus for the economy and the currency.

I could really go off on a tangent now about how trading desks are run by Ivy leaguers that got that job right out of grad school and don’t carry the same “valuation tools” as the old timers. And quite frankly they could very well be one of the reasons we’re in this mess today… But I won’t go there, as that’s too touchy of a subject!

The European Central Bank (ECB) will also meet today, but ECB President, Trichet, has pounded it into everyone’s heads that the ECB will NOT cut rates today, and to look to the March 5th ECB meeting as the next “chance” for a rate cut.

No One Wants to Listen to Volcker?

Our old Fed Chairman, who is highly regarded for his inflation fighting in the early 80’s, Paul Volcker, spoke last night.

He’s none too happy with the delay in starting the economic advisory group that the new President, Obama, set up. Obama picked Volcker, but Volcker isn’t seeing any moving forward with this advisory panel.

Volcker wants to help, and I believe we need his voice, but no one wants to “include” him. Hmmmm… I wonder what’s going on there. Does the new administration believe they don’t need Volcker’s voice? I sure hope that’s not true!

“Gold Will Hit $1,000 in Three Months” – Goldman Sachs

I’ll end today’s letter with a “feel good story.” Gold rallied to US$915 yesterday. Gold traders say that they believe government spending will spur inflation, the dollar will weaken, and gold will take off on the strength of its inflation-fighting make up.

Goldman Sachs Group, Inc. (which probably has so many research people you can’t count them with sticks,) said that they believe gold will reach US$1,000 within three months. And a commodity analyst at Dresdner Bank said this, “expectations of future inflation and dollar depreciation are driving the market right now.”

I told the crowd at my presentation yesterday that gold IS an excellent inflation fighter. I told them don’t listen to those that preach otherwise, because traders against gold tend to point to gold’s high in the 80’s at US$800. Then they say gold hasn’t done a very good job of fighting inflation since then.

But, not so fast Tim! I say you have to go back to when President Nixon closed the gold window, and took the dollar off the gold standard. Gold was trading then at US$35 an ounce at the time. Now follow gold’s price through the years to the present at US$915. Now, that’s what I call an inflation hedge!

And finally on gold: Kristin, a metal trader here at EverBank, sent me this note that she came across…

“Short-term,” said Tom Pawlicki, of MF Global in Chicago, “Investment has been a key supporting factor for gold,” and thus, “Passage of the stimulus package in its current form would likely be inflationary and bullish for gold while a Senate filibuster would be bearish.”

You hear that? All this stimulus could be the next spark to ignite gold prices…

That’s it for today… Time to hit the send button and get ready to meet Chris Gaffney for breakfast. He’s probably already gone out and run 10 miles this morning! He’s amazing! Oh, well, that’s not for me, I’d rather spend my time with you dear reader!

On that note, I hope you have a Thundering Thursday!

Chuck

P.S. As you may have heard, our researchers have been preparing a special gold report to appear here in FX University. I just got word that we can expect this report starting on Monday. Be sure to tune in on Monday for the full story on how the most aggressive “money-printing-campaign” in world history will affect gold prices this year.