Gold Macro

Well, welcome to a new decade! What a start, no shortage of market moving news to distract the best laid holiday plans.

So far, Australia begins to count the cost of fire disasters as the Middle East (ME) looked like firing up and, this week, we’ve had, what seems like, the 12^th US/China trade deal in three months.

The situation in the ME really did look like firing up after the assignation of one of Iran’s top generals by the US, until not a drop of coffee was spilt on a US uniform in “the retaliation”.

Must be that “all is truly well”.

Financial Markets are certainly back to normal.

Daily Bail outs by the US Fed in overnight “repo” markets, every day money printing and market support that we cannot call QE!

The best of all this is the daily NEW ALL TIME HIGHS in the US stock market.

To the point that the US stock market is now 185% of GDP, the long term average is 85%.

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As big as the win last week was for “Brexit”, as small as the “huge” Trump trade deal is, no news of the last week *Trumps* the gargantuan US Fed promise of 500BILLION to a frozen short term REPO money market over the next few weeks, just to keep the engine running and stock markets rising.

It is laughable that this time last year The Fed, Goldman and all other Wall Street cheerleaders were prognosticating more tightening, 3 to 4 rate hikes for 2019 as everything was awesome.

Then the share market fell through December 2018 and Jan 2019, so we ended up with 3 rate cuts, the promise to “print whatever it takes”, culminating in the commitment of 500BILLION over the next few weeks so everyone can enjoy the festive season without having to worry about pesky financial seizures and everything is still awesome.

As we pointed out in our last note, the “anti-freeze” application all started on September 17.

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Welcome to a new economic week. 

Last week we were forced to carefully reconsider, not just the continuance of Australian rate (down) trends, as demonstrated in the charts below but also the emergence of “the word”, inflation. 

What if rates were to fall to 0.50% and the cost of living went up by 5% in a low growth world? We’re not there yet but fairly sure (noise out of RBA) Aussie QE starts first quarter next year after one more downward rate move.

Who do you know that wants to decrease their income whilst increasing their cost of living? Central Bankers, that’s who! Certainly, the RBA is focused on increasing inflation.

We’ve said it before and we’ll say it again, they will eventually get the inflation they so desire! The big question is, can they stop it when they want?  

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