As all experience from the past clearly demonstrates, it is a mistake to believe that the gold price is set solely by dollar interest rates, or its relative strength in other currencies. This being the case, the current weakness of the gold price is simply a reflection of temporary dollar shortages, and nothing more.
After tagging $19 the night of Trump's victory, Silver prices have tumbled 15% (the biggest drop since Summer 2013's taper tantrum). However, as large speculators dumped their longs en masse, this week also marked another milestone as Silver drops 24% from its post-Brexit peak (above $21) and entered a bear market once again.
"Things have not suddenly become awesome over the course of the past week... It is very easy to be sucked into the gushingly positive narratives and often unsupported narratives put forth by the financial media. This is particularly true when the move in asset prices can make minutes seem like days and hours seem like months. Excessive market valuations, weak internal measures, and a deteriorating backdrop has historically been a “wicked brew” for investor outcomes."
1) Peak Liquidity: era of excess liquidity is over; 2) Peak Inequality: more fiscal stimulus to address inequality; 3) Peak Globalization: free movement of trade, labor, capital ending; FX wars starting; 4) Peak Deflation: low point in bond yields now behind us; 5) Trough Volatility: era of “flash volatility” and “pain trades” continues; 6) Peak Passive: active investors to outperform passive; 7) Transforming World: robotics, eCommerce constrain inflation upside
Violent rotation: record inflows to equity ETFs, record inflows to financial sector funds, biggest bond redemptions in 3½ years, record redemptions from EM debt, largest equity inflows in 2 years ($28bn), biggest bond outflows in 3½ years ($18bn); widest weekly disparity between stock & bond flows ever.
There was an awful lot of cheering about the recent retail sales report which showed an uptick of 0.8% which beat the analyst’s estimates of 0.6%. However, if we dig deeper behind the headlines more troubling trends emerge for the consumer which begins to erode the narrative of the "economy isdoing great" and “there is no recession" in sight.
As part of Donald Trump's "fluid" proposals and trial balloons on how to implement his economic policies, adviser Steven Mnuchin told reporters on Wednesday that the Trump transition team is weighing an "infrastructure bank" to make investments in America's aging infrastructure. Mnuchin said that a "very big focus is regulatory changes, looking at the creation of an infrastructure bank to fund infrastructure investments” which to Wall Street was pure poetry as it heard just two words: "more debt.