I think the trend in Gold will continue until the Fed reverses there position on interest rates. Maybe I'm missing something here, but I see inflation as a bigger problem right now than trying to maintain growth in the US by cutting interest rates. Bernanke said he cut rates to help restore confidence in the financial institutions. On January 21st, I probably would have done the same. However, I think the belief that the Fed is going to keep cutting rates and keep them down isn't going to play out for very long. Bernanke and company are smart guys, and the blame shouldn't be put on them. I agree with the senators complimenting Bernanke on being sincere in his statements and being straightforward in his remarks. It's interesting to note that one of the senators asked Bernanke today if he thought that reducing interest rates would help the economy and housing market. Mortgage rates are still high even though short term bond yields have come down. The idea of cutting interest rates to in effect lower mortgage rates and help boost buying in homes hasn't worked thus far.
While short term bond yields are lower, the long term bond yields haven't come down very far in comparison. It has been noted that any further interest rate cuts would in effect put the real rate negative when adjusted for the the current inflation rate. Bernanke is hoping inflation will stabilize and come down in the future and I think that as soon as inflation indicators (Oil,commodities) come down that the Fed may increase interest rates again, which would hopefully help the US dollar. The next FOMC meeting is going to be huge IMO, and I think there is potential for a sharp reversal in all markets shortly there after on what further actions the Fed takes after the next meeting.
5yr vs 30yr
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