Hi chong3000,
Happy to give opinions but please rely on your own thinking when it comes to investing your own money.
Firstly you are asking me to assume that US interest rates will rise in a significant way.
My view is that it is virtually impossible for the US to lift rates in any significant way because of the torrent of money that has been printed both in the US and internationally. Although we have more money in the world of all denominations the rate at which each unit of currency is being turnover (spent) is slowing down. Peak levels of consumer debt in the US were hit before the GFC so spending driven by borrowing has also peaked. If real wages are not increasing and consumer debt is not driving spending then the US economy can't move forward unless it is being fuelled by trade surpluses or productivity increases, which currently there is no evidence for that I know about. The excess industrial capacity that has been created worldwide by the debt balloon and the misallocation of capital that it brought will make it increasingly difficult for the US to ever make trade surpluses or improve productivity. Listed companies in the US operating under the umbrella of the Fed have little incentive to worry about productivity when their share prices are at all time highs and constantly propped up by all the excess money that needs a home. People with small businesses in the real economy in the US not only have to compete on an un-level playing field, paying higher interest than their corporate cousins, but imagine the drag on the US economy if interest rates are lifted and the people with car loans, student loans and all sorts of credit for consumer items are forced to pay more. Employment growth in the US since the GFC has been built off the back of part time and under-employed workers, the very people who are likely the worst affected by increasing credit costs. Besides all that I don't actually believe the Fed has a technically viable transmission mechanism for lifting ("normalising") interest rates, so my view is that we are stuck in a kind of Ground Hog day where the only effective transmission mechanism left to affect markets are the words that come out of their mouths and the fear that those words engender. How long can they drag out each 0.25% hike? Where is the escape velocity in the US economy going to come from to lift rates and at the same time hold markets together? Unless they invent something new that disrupts the entire world very soon, I can't see any hope for their economy or markets.
As far as the $A goes I think it is at the mercy of our closest trading partners and I still think the bias in China and Asia is towards declining economic growth so I believe the bias for the $A is also down. Although if the USD falls for whatever reason the commodity complex generally gets a bit of a lift helping the $A, so all in all I see relatively stable gold prices into the future both in $US and $A terms. My idea of stable however may not match others ideas. For the gold producers I own, stable is within plus or minus $100/oz.
I also posted this today on the RMS thread which might be helpful to put things into perspective.
http://hotcopper.com.au/threads/ann...2839052/page-42?post_id=18769161#.V8QMPKNJntQ
A little more discussion on the HUI gold ratio which helps put the movements in that chart into a longer term perspective. When the gold price starts to go sideways or down the fundamental performance of individual gold producers becomes much more critical so as an investor one should look at exactly what one's companies have delivered and what they are forecasting to deliver. If your gold producer stories are murky, contain mothering statements, or are lacking forecasts or facts then they are the stories to avoid in a sideways or falling market IMO. In a sideways market you just have to let the good performance of your gold producer take the drivers seat. If it is truly performing well your returns should in theory be driven by that performance over time. That's what investing is all about. I personally don't see much to worry about.
Eshmun
