Archive for April, 2023

Trading Silver

The cost of silver has skyrocketed within the last week to nearly $50 an ounce.  After the Federal Open Market Committee met to discuss the current state of the U.S. economy, the decision was made to continue with the current policy of monetary easing.  Despite inflation worries and a jump in commodity prices, Bernanke explained to reporters that while there has been some improvement in the area of job creation, the Fed's primary goal was to stabilize the financial markets.  He continued by saying that the Fed recognizes that there is growing inflation, which is not sustainable in the long term.  In response, he indicated that the Fed will likely begin to raise interest rates around mid June.  

While there was expectation of a devalued U.S. dollar, the Forex Robot team did not anticipate the very quick and unprecedented spike in agricultural and commodity prices.  Some well known contrarian investors believe that while long-term prices will continue to increase, these short-term prices are simply too high.  As with all investment advice, you must first do plenty of homework and understand current trader sentiments.  

The Weak USD and You

A Weakened US Dollar

Much debate is taking place between economists about the ramifications of a weakened US Dollar, global prices, and long-term economic stability.  Despite their critics,  Federal Reserve Chairman Ben Bernanke and Timothy Geithner have taken an aggressive posture that promotes monetary loosening.  An increased supply of currency in an economy allows financial institutions to loan money to individuals and businesses that looking to grow or become established.  

When global economies were jolted by the collapse of the Lehman Brothers due to poor investments, panic quickly spread throughout the financial world.  People were coming to the realization that the surge in global market and commodity prices were in fact the result of a massive, over leveraged bubble among poorly regulated financial institutions.  Limited oversight in the mortgage industry in the U.S. housing market contributed greatly to historic recession.  Millions of happy home owners were unaware of the fine print in the mortgage contract that included rate hikes.  Predatory lenders made sure not to mention these facts to applicants who were simply unfamiliar with the mortgage process.

In response to the market crash in early 2008, financial institutions stopped lending money to both individuals and businesses.  In a climate of economic fear, these companies were unwilling to risk loaning funds to others, especially with so many reports of bankruptcy, job losses, and defaults.  After bailing out large institutions to stabilize economic institutions, the Federal Reserve and Treasury worked together to avoid deflation and economic stimulation.  Despite a stubborn unemployment rate of 8.7%, the U.S. economy is expanding and companies are reporting large profits.

What To Expect 

With a weakened US Dollar, global companies will begin to move their manufacturing of goods and services inside the United States.  With prices in the United States relatively cheap, many tourists will come to visit.  Additionally, many companies that are presently using workers in neighboring countries, such as Canada and Mexico, will likely move their plants to U.S. soil.  U.S. companies will enjoy greater revenue than their European peers due to less expensive U.S. products.  In summary, the U.S. will be in an expansionary position until the USD appreciates to a healthy equilibrium with other world economies.  

Should there be economic global disruptions, such as terrorism, war, natural disasters, or the collapse of the Euro, the Green Back will once again appreciate.  Albeit, for a short period of time.  

Gas Prices and their Impact

Gas prices throughout the world are nearing record highs, impacting the middle and lower classes.  Robot Forex understands that Americans in particular are heavily reliant on automobiles, especially in less urban areas.  This will cause many to either change their spending habits or limit their gas consumption.  With upbeat quarterly profit reports that largely surpassed expectations, large world economies like China, India, and the UK are beginning to report higher inflationary pressures.  The U.S. consumer has been particularly hit hard by the current economic situation.  While companies enjoy large profits, the unemployment rate is still near 9.0%.  

According to economists, a short-term tax or temporary spike in fuel prices are unlikely to cause a change in consumer behavior.  Historically however, prolonged tax increases or high gas prices will negatively impact economic growth.  Consumers will either shift their driving habits or simply spend less.  Simultaneously, companies will pass transportation surcharges to the consumer, creating an additional burden for buyers.  To make matters worse, with the dollar quickly depreciating in value, many of the items we take for granted at large retailers will be more expensive.

Robot Forex believes that a combination of governmental debt, high gas prices, and continued inflationary pressures will cause the economy to sputter after several consecutive months of growth.  With so much volatility in the market, there is always tremendous opportunity to make serious money on the Forex Exchange. 

Standard & Poor’s Downgrade

The Robot Forex team was not surprised to learn of Standard & Poor's recent downgrade of the United States's ability to pay back its ballooning debt, which has now reached over 14 trillion dollars.  The news of this downgrade quickly rattled European and U.S. markets, which lost between 1% and 3%.  Gold reacted little to the news, while oil dropped over 3% since the report was released.  The oil sell-off can also be attributed to an oil minister from Saudi Arabia who reported an overall decrease in oil output last month.  His reason for this decrease was due to an over-supply of crude on the markets.  Agricultural commodities, such as corn, soybean, sugar, and wheat increased with an expectation of continued erosion of the purchasing power of the U.S. dollar.  

With continued uncertainty about the health of the US and Euro-Zone economies, there continues to be a lot of volatility between the Euro and USD.  As the Robot Forex team has pointed out many times throughout our site, the biggest benefit of trading on Forex is that there is always room for profitability.  Robot Forex members will continue to review the latest automated Forex Robot systems for traders and supply you with important financial and economic news updates on a nearly daily basis.  

Libyan Peace?

Current Events

Commodity prices were lower today after investors took in profits after a persistent and robust rally since the onset of Middle East unrest.  A combination of US dollar weakness, increased commodity prices, and a stubbornly high unemployment rate has cast some doubt among for some investors.  Is the rally sustainable, or this strong bull market simply the result of Federal Reserve currency manipulations?  Economists are concerned about a burgeoning debt that will result in stagflation.  Despite the fear of an increasingly more conspicuous inflationary effect on the dollar, Ben Bernake and his team have no plans to increase interest rates.  In fact, the Fed is planning on buying more government bonds.  

With European countries taking a more cautious approach towards inflationary pressures, the Robot Forex team expects the dollar to continue weakening over time.  Additionally, we believe that commodity prices will continue to rise over the long-term, but expect a short-term correction, especially if stability returns to oil-rich Middle Eastern countries.  

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