Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth.
What do an old German bank note, a current $100 bill, and an apple all have in common? The answer, according to ConvergEx's Nick Colas, is that these simple objects can tell us much about the current investment scene, ranging from Europe’s economic challenges to the U.S. Federal Reserve’s attempts to reduce unemployment. Colas takes an “object-ive” approach to analyzing the current investment landscape by describing 10 common items and how they shape our perceptions of reality. The other objects on our list: a hazmat suit, a house in Orlando, a barrel of oil, a Rolex watch, a butterfly, a heating radiator in Berlin, and a smartphone.
"The Fed is really holding the market up.... The Fed turned this market around here because it let it be known that the Fed funds rate isn't going to be raised in March. I am concerned about the high yield market, I think that's in a major bubble, but nobody knows when it's gonna burst." - Carl Icahn
The head of the San Francisco Federal Reserve Bank on Tuesday said he would be open to another of round asset purchases if inflation trends were to fall significantly short of the U.S. central bank's target. Although he said it would take a big shift in the U.S. economic outlook for the Fed to restart its bond buying, John Williams said the possibility of a new downturn in Europe and other global economic woes pose a risk to the United States. "If we really get a sustained, disinflationary forecast ... then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider," Williams said in an interview with Reuters.
With this in mind we hope the Swiss people display their fierce independence and reject the advice of the "experts," many of whom got us into this mess, in favour of the policies that have kept them peaceful and prosperous for centuries ...
"...the world goes through frequent cycles of redefinition and these periods mean increased tensions and higher volatility. China and Russia are now forming a strong anti-US and anti-dollar alliance. This alliance is expanding in magnitude and impact as China increases its presence not only in Africa but also in Club Med via infrastructure investments." The new world order means less US dominance, a gradual weakening of reserve currency advantages and trade areas away from from Europe and the US. Add to this the much-needed fight against radical Islamism and we have a potential for geopolitical risk finally becoming part of risk assessment and return.
On Tuesday, the Dow fell 272 points. No big deal, of course - we rebounded the most in 3 years yesterday. But what if it continued? Just six years ago it fell 51%. It could easily do so again – back down to, say, 8,000. There would be nothing unusual about it. 50% corrections are normal. You know what would happen, don’t you? Ever since the "Black Monday" stock market crash in 1987 it has been standard procedure for the Fed to react quickly. But what if Yellen & Co. got out the party favors... set up the booze on the counter... laid out some dishes with pretzels and olives... and nobody came? What if the stock market stayed down for 30 years, as it has in Japan?
Almost everyone is expecting much higher yields in the near term, but a 30-year drop in yield toward 2.5% should be considered as a possibility for these 8 reasons...
This may be excessively optimistic on my part, but there seems to be a slow change in the way the world thinks about reserve currencies. For a long time it was widely accepted that reserve currency status granted the provider of the currency substantial economic benefits. For much of my career I pretty much accepted the consensus, but as one starts to think more seriously about the components of the balance of payments, it is clear Keynes wad right in his call for a hybrid currency when he recognized that once the reserve currency was no longer constrained by gold convertibility, the world needed an alternative way to prevent destabilizing imbalances from developing. On the heels of Treasury Economist Kenneth Austin and former-Obama chief economist Jared Bernstein discussing the end of the USD as a reserve currency, Michael Pettis summarizes 10 reasons the USD's reserve status has become an 'exorbitant burden'.
The divergent prospects for growth, interest rates and monetary policies between the euro zone and the United States has led to a completely normal depreciation of the euro against the dollar, despite this depreciation being limited by the euro zone’s external surplus. Most observers are exuberant about this depreciation of the euro, but Natixis asks, faced with imports that the euro zone cannot do without (commodities, components manufactured outside the euro zone due to the segmentation of production processes), is it certain that it has a positive effect on euro-zone growth? Given the sensitivity of the euro zone's foreign trade (in volume terms and in terms of prices) to the euro's exchange rate, and at the historical link between the relative growth of the euro zone and the euro’s exchange rate, Natixis (devastatingly for the recovery-enthusiasts) find that the effect of a depreciation of the euro on euro-zone growth is very minor at best and, at worst, zero.
You show me sustainable growth through monetization and I'll take my bat & ball and go home. Until then, you're blowing hot air up my backside.
The Council on Foreign Relations may be concerned about the ramifications of China accumulating larger gold reserves than those that the U.S. has and the People’s Bank of China (PBOC) giving the yuan some form of gold backing. This would pose serious challenges to the dollar as global reserve currency and thus to U.S. hegemony.
The game is many boards deep. Nobody has god-like powers, every player makes mistakes and miscalculations. The advantages and arrangements are all contingent and temporary; those with the most flexibility and the deepest spectrum of assets will eventually increase their influence at the expense of those with weaker hands and those who fail to respond promptly and decisively to new configurations on the multiple boards in play.
De-dollarization has been an ongoing theme hidden just below the surface of the mainstream media for more than a year as Russia and China slowly but surely attempt to "isolate" the US Dollar. Until very recently, direct trade agreements with China (in other words, bypassing the US Dollar exchange in bilateral trade) had been with smaller trade partners. On the heels of Western pressure, Russia and China were forced closer together and de-dollarization accelerated from Turkey to Argentina as an increasing number of countries around the world realize the importance of this chart. However, things are about to get even more dramatic. As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency in a "fresh step forward in China’s yuan internationalization." With civil unrest growing on every continent and wars (proxy or other) at tipping points, perhaps, just perhaps, the US really does want rid of the weight of the USD as a reserve currency after all (as championed here by Obama's former right hand economist)... now that would be an intriguing 'strategy'.
With the revelations of systemic, widespread corporate criminality of banking institutions in recent years, it is clear that global Bank CEOs are becoming the new Drug Lords.