Author: Dailyfutures.com

Article:
As we begin the new year of 2002, there are four markets on the
verge of major trend changes: gold, silver, the British pound,
and the 10 year Treasury notes. All four changes are directly
related to the Federal Reserve's decisions to cut interest rates
eleven times last year. Please understand, I'm not complaining,
just observing. There was probably little else that the Fed
could have done given the events of last year. For investors,
these shifts are worth noting.

The past ten years have been the poorest decade that the gold
and silver industries have had in ages. Recently, central
bankers around the world have been dumping their metals, sensing
that inflation is no longer a threat, and pushed prices to
historical lows. Producers adapted by cutting production (gold,
silver, and copper) and started a trend of consolidating into
fewer, larger mining companies. These changes, along with the
Federal Reserve's eleven interest rate cuts are giving the
metals new potential for higher prices. Technically, June gold
above $280 and July silver above $4.65 would signal significant
improvements in the long-term trend.

The British pound has been in a downtrend for three years while
the U.S. dollar has been king, but the events of 2001 have
shifted the tide of growth to the U.K. The U.K. is estimated to
have grown 2.5% last year, the best of the G-7 nations, and the
same is expected for this year. Technically, the March pound has
a chance to go higher if it can hold above $1.45.

The March 10 year T-notes have been in a strong uptrend for the
past two years, having benefitted from the weakened U.S.
economy. First, the crash of the technology sector along with
declining corporate profits pushed investors into the
Treasuries. Then, the events of September 11th dealt a serious
blow to the economic outlook, giving T-note prices another
boost. Now however, after eleven interest rate cuts, investors
are starting to anticipate a recovery and the Fed is not likely
to be concerned if a little inflation shows up. The Fed's
current mission is to get this economy rolling again and that is
not a good scenario for T-notes. Technically, a close in March
T-notes below 103.50 would be significantly bearish.

In the big picture, higher metals prices, a weaker U.S. dollar,
and falling Treasury note prices could be the start of higher
commodity prices in general. 1986, 1992, 1998, and 2001 were all
terrible years for commodity prices. The following years,
however, proved to be highly profitable. Will 2002 be the same?
As always, there are no guarantees. Have a Happy New Year!

Dailyfutures.com. January 1, 2002.

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