SilverGoldMarketNews   Home | Buying Silver/Gold | Archives | Mining | Contact

News, Information, Commentary and Resource Links for Investors in the Current Great Silver/Gold Bull Market

 
 

Site Navigation
 Home
 Buying Silver

 Archives
 Mining
 Contact

 Disclaimer
 Privacy

Recommended
Archives
 Ted Butler
 Jason Hommel
 Douglas Kanarowski
 Clive Maund
 David Morgan
 Jim Otis
 Charles Savoie

Continuous Charts
 Gold
 Silver
 Gold/Silver
 Silver/Gold
 $USD Index
 Dow Industrials

Futures Charts
 COMEX Silver Daily
 COMEX Silver Weekly
 COMEX Silver Monthly
 CBOT Silver Daily
 CBOT Silver Weekly
 CBOT Silver Monthly

 COMEX Gold Daily
 COMEX Gold Weekly
 COMEX Gold Monthly
 CBOT Gold Daily
 CBOT Gold Weekly

 CBOT Gold Monthly

Resource Links
 CoinInfo.com
 Commitments of Traders
 CMI Gold & Silver
 Forex Traders
 Forex Trading
 GATA
 Gold Silver Worlds
 Harvey Organ's Report
 Honest Money Report
 Kwaves
 Kitco
 Kitco Casey

 Kitco Silver
 Metal Prices
 Money Metals Exchange
 Money Changer
 Moon Phase Calendar
 Resource Investor
 Silver Futures News
 SilverCoins.com
 Silver Bear Cafe
 Silver Institute
 Silver Prices 1344-1998
 Silver Strategies
 TheSilverExchange
 To Buy and Sell Silver
 Trading Charts

 Turd Fergeson's Metal Report

 

   
 

 

   
 

 

 

 

 

 

   
   

Search Precious Metal, Mining and Financial News

a
Think That Central Banks
Move the Markets? Think Again

By Mark Galasiewski

The following is excerpted from Elliott Wave Internationalís Global Market Perspective. The full 120-page publication, which features forecasts for every major world market, is available free until April 30. Visit Elliott Wave International to download it free.

Conventional wisdom says that central banks can influence or even direct financial markets and the macroeconomy. The very existence of Elliott waves challenges such assumptions. For if markets responded to every central bank directive, how could Elliott waves exist? Parallel trend channels, Fibonacci price relationships, the similarity of form between waves of different sizes and time periodsónone of that would be possible. Central bank decisions would have to coincide perfectly with turning points in Elliott waves, and we know that just doesnít happen. But even without using waves, we can expose the conventional wisdom for the fallacy that it is.

Take, for example, this assertion in a recent article in a U.K. economic weekly: ďPart of the aim of central banks in driving down interest rates is to encourage a greater risk appetite among investors.Ē Two key assumptions underlie that statement: a) central banks determine interest rates; and b) lower interest rates can increase societyís appetite for risk.

To see how the first assumption is false, letís take a look at the daily chart of Australian interest rate data. It duplicates a study that Elliott Wave International has often done with U.S. interest rate data. It shows how movements in the cash target rate set by Australiaís central bank, the Reserve Bank of Australia (RBA), appear to follow those in 3-month Australian Treasury Bills. After decisive moves up in T-bills from 2006 to early 2008, for example, the RBA faithfully raised its target. T-bills have since led the RBA during the financial crisis of the past year. In fact, the record indicates that the RBA almost always follows T-bills over time.

The RBA follows Treasury Bills

The proper conclusion to draw is not that the RBA has orchestrated the decline in rates since the early 1980sóbut that itís been riding it. During good times, central bankers look like geniuses; during bad times, they get tarred and feathered. Closer to the truth is that their interest-rate decisions are not proactive, but reactive, and that they continually follow in the footsteps of the market for lack of any other useful guide.

Now letís look at the second assumption: that lower interest rates increase societyís appetite for risk. A simple glance at the weekly chart shows this assumption to be false. After the 1987 crash, the ASX All Ordinaries actually rallied for two years on rising rates and then sold off through 1990 on falling rates. Stocks then rose in 1991 on continued falling rates and sold off in 1992 on even lower rates. Continue following the chart to the right and you will see that there is no consistent correlation between the direction of interest rates and that of the stock market.

Stocks have no consistent correlation to interest rates

The myth of central bank potency is so pervasive that conventional analysts canít even imagine a better explanation for price trends: that the market is the dog wagging its central bank tail, not the other way around.


For more information, download Elliott Wave Internationalís FREE issue of Global Market Perspective, available until April 30. The 120-page publication covers every major world market, global interest rates, international currencies, metals, energy and more.


Mark Galasiewski is the editor of Elliott Wave Internationalís Asian Financial Forecast and member of EWIís Global Market Perspective team covering Asian stock indexes.

 

 

Site Design and Maintenance Services by: Sundancer Graphics, Inc



© 2015 Sundancer Graphics, Inc.