here we go , page-3

exactly charlie atkins / group think in the big financial end of town....below is an extract from his daily report yesterday...

A very, very significant night in currencies, US interest rate markets and precious metals that has
completely overshadowed small equity market moves.
The big move is the US yield curve, which has moved dramatically higher and is now out of line with the
Fed’s stated goal of holding interest rates at zero until 2014. As at this morning Fed Funds futures are
pricing in a full 25bp rate hike as soon as the end of 2013, and 1yr US rates in one year’s time are at 58bp,
implying more than a 25bp hike. US 10yr bonds broke the 200day moving average, with yields spiking to
2.27%. This is the biggest move up in the US yield curve in a very long time and you can understand why
the US Dollar saw heavy buying.
The US Dollar Index (DXY) catching a bid undermined all commodity currencies and precious metals. The
short USD carry trade was being unwound with gusto last night, driving the AUD down to 104.46 and gold
down -$50oz to $1642. Silver got punished too, down -4.26%. This massive shift in the US yield curve
could really undermine precious metals and we need to very vigilant in how this unfolds for the precious
metals and precious metal equities. The PHLX Gold/Silver Index lost -3.4% and was the worst performing
US sector.
The fact is the big shift up in the US yield curve is reflecting the view that the US economy is starting on a
self-sustaining trajectory. That probably means in commodities that industrial metals (and bulks) will
outperform the precious metals. That is exactly what happed last night with copper and oil only down ¼ of
what the precious metals lost. Spot Iron Ore rose +20c to $144.40.
Wall St broadly ignored the huge US Dollar and US interest rate rises, but with the backbone of the US
equity markets rally being “free money” and a “low USD”, it’s hard to see how last night’s developments
aren’t a headwind for US equities.