Tags: hyman | rate | cuts | commodities

Recent Interest Rate Cuts Will Drive Commodities Higher

By    |   Monday, 09 Jul 2012 09:43 AM

The central banks of the world just put into motion something that will help commodities in the months ahead.

Several central banks lowered their interest rates!

Coming out of the July 4th holiday here in the U.S., China decided to announce a surprise interest rate cut. They cut the one-year lending rate by 31 basis points and the deposit rate by 25 basis points.

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Then continuing the “rate cut theme” on that same night, the Bank of England announced that it raised the target of its asset purchase program by 50 billion pounds to 375 billion pounds. So there went another form of easing (even though they kept their official interest rate at 0.50 percent.

Then the ECB followed suit and cut the interest rate by 0.25 percentage point to 0.75 percent.

After that, Denmark followed the ECB’s lead and cut their benchmark lending rate to 0.20 percent from 0.45 percent formerly. Here’s the kicker though. They reduced the deposit rate from 0.05 percent to a negative 0.2 percent. Yep, you heard right!

Why would they make people pay interest? Well, if you can’t earn interest, then you’re likely going to put that money to work in the economy where you can earn a decent yield on it.

This will discourage foreigners from funneling money into Denmark as a safe haven, and it will encourage investors in Denmark to get money that is in savings now into the stock market, where there is room for gain through appreciation of the stock price and through reaping a dividend too.

So with some form of easing coming out of China, the Bank of England, the European Central Bank and Denmark, it’s going to stoke the fires of inflation and drive up commodity prices all over the place.

For those who are invested in commodities or commodity-related stocks like we are in the Ultimate Wealth Report, you’re going to want to thank these central banks.

Editor's Note: Join the 3.5% of Americans who are truly wealthy and financially secure.
 
However, for those who aren’t positioned like we are in the market, you’re probably going to be ticked off, because your costs are going to rise and this will eat further into your purchasing power over time.

Now… these interest rate cuts are supportive of the global economy’s recovery and growth, but that too will end up driving up commodity prices as more demand comes on line and tightens the supplies of commodities.

Therefore, the handwriting is on the wall. Oil will rise. Gasoline will rise. Natural gas, steel, copper, coal, wheat, corn, sugar, etc., will all rise, and you’ll feel it in the marketplace as you shop and fill up your car.

Either you’ll position your investments to benefit from the will of these central banks and profit from it … or you’ll become the victim of inflation and see your purchasing power erode away.

These central banks have an agenda and they don’t care what you and I think or how it necessarily affects us as individuals. So you’ve got to do like we’re doing and take matters into your own hands by positioning your investments to profit as these central banks make these inflationary waves that are to be ridden out.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.


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2012-43-09
Monday, 09 Jul 2012 09:43 AM
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