Commodity Trade Mantra

Posts Tagged ‘Monetary Policy’

Risk-On Mania Infected Markets will soon be Gold Silver Friendly

The Trump election has ignited a market mania, to everyone’s surprise. In fact, we think that risks are rising, not falling, but that’s not what the markets think as of now. Actually, in economic terms, nothing real has changed for the better & the relief probably won’t last long. And then we will see what the world really looks like. Guess it will be very gold silver friendly.

The Major Catalysts That Influence Gold Prices

Physical gold had its best quarterly gain in 30 years during the first quarter, and year-to-date, even with its recent swoon, physical gold is higher by roughly $200 an ounce. Gold has firmly reestablished itself as being in a bull market. The factors that move gold prices are largely unknown or overlooked. Let’s have a look at the seven most common factors that influence physical gold prices.

The Fed’s Missed Window To Hike Rates & Failed Realizations

What is clear is the Federal Reserve should have chosen to increase rates long ago where such tightening of monetary policy would have been somewhat offset by the continued floods of interventions. The window to lift interest rates appears to have closed which could potentially be a policy nightmare. Eventually something has to give & it will likely not be the outcome the Fed hopes for.

The SDR Is Designed As A Rescue Operation For The US Dollar

The IMF created the SDR Substitution Account in 1969. T he core idea is that the SDR Substitution Account Central Banks allows to diversify their existing US dollar reserves in a one-time conversion away from the dollar into IMF’s SDR, comprised of the US dollar, European euro, Japanese yen and British pound, in an off-market transaction, so as not to depress the dollar’s exchange rate.

Negative Interest Rates: The Tax On Capital

Negative interest rates remove the positive “interest” paid to savers which is supposed to (partially) protect us from the rapacious “real inflation” running at 10+% per year. They go well beyond even this level of economic theft & criminality. Negative interest rates tax capital. How do you “stimulate” an economy by taxing capital? The inevitable result can only be the complete economic destruction.

Double Digit Inflation And The Rise of Gold

Inflation can really spin out of control very quickly. So is double-digit inflation rate within the next five years in the future? It’s possible. We would see a struggle from two to three, and then jump to six, and then jump to nine or ten. This is another reason why having a gold allocation now is of value. Because if and when these types of development begin happening, gold will be inaccessible.

Exposing The Link Between Monetary Policy And Social Inequality

Our monetary policy direction has been prolonging the slowdown since 2008. The longer we wait, the worse the hit we will take. We are going from one bubble to another and are just postponing the inevitable. Under our current system, which has stripped the working class from their savings, they are exposed to greater risks than ever before.

Gold Wins in 3 out of 4 Scenarios - None Bode Well for the Economy

If you think of gold, the only way gold loses is if normal business and private sector cycles come back. If that is the case, gold goes back 100 dollars per ounce. The other outcomes, deflation, stagflation, hyperinflation are good for gold. So gold wins in three out of four scenarios, but none of the three are particularly appealing. Here is why.

Helicopter Money Tested And Failed Spectacularly, Surprising Only Economists

Imagine waking one morning to find extra cash in your account, a gift from your country’s central bank. That might sound outlandish. But the concept of so-called helicopter money is being seriously debated by economists. Helicopter money handed directly to consumers, the theory goes, would send us scurrying to the shops to spend our windfalls, boosting confidence in the economy.

End of an Era: The Rise and Fall of the Petrodollar System

Similar to the paradigm shift – the transition to the petrodollar system that followed with the collapse of the Bretton Woods system, there is another major shift underway today. We will know its consequences in full, the day oil-producing countries demand gold for their oil, instead of dollars. The Gulf states are seeking measures to reduce their dependence & exposure to the US dollar.

Gold Prices will easily Triple on a Collapse in the Monetary System

What could possible make gold prices go from roughly $1,350 an ounce now to triple in value at US$4,200? The inability of central banks to wind down their balance sheets and the continued effort to stimulate the economy by, admittedly, unconventional means will end our current currency system. We will then return to some sort of gold standard, thus sending it soaring.

Future Prospects for Fiat Currency Money & it's Purchasing Power

The faith and credit-standing of issuers of paper money, and not the known and suspected inadequacies of commercial finance, is the last rotten pit-prop supporting the system. We can easily see how a new round of monetary expansion designed to save the global banking system from its nemesis will lead, not to a Lehman-style outcome, but to a collapse of paper currencies.

Currency Manipulation by the United States Is Alive and Well

Although further currency manipulation is far from ideal, the US is in no place to criticize Japan for it. Historically, the US has been the world’s leading cheerleader for currency manipulation. If the United States government wants to continue dishing out anti-currency manipulation rhetoric, it best explain why it’s had its own hands in the foreign exchange market.

Push Gold Prices Higher to Unleash Inflation - The Elite’s Master Plan

Yesterday, I explained how the monetary elites are looking to engineer higher gold prices to generate inflation since nothing else has worked. That’s the first answer. Today, I show you the second part of their plan, which may already be underway. The plan now is to have much larger budget deficits. When the government spends & deficit finances it, it will eventually produce inflation.

Gold Prices are Consolidating, Instead of Correcting - Pulling back for a Bigger Leap?

Gold has now spent two full months trading between US$1,210 and US$1,270 per oz. The lowest point of that range still has the yellow metal up 12% compared to the start of the year. Instead of correcting, gold is consolidating. You can think of that as correcting through time rather than price. Doing so proves the move was valid. Gold equities have also held their ground.

Gold and the Postponed Stock Market Correction

Is it just me or is the next market correction taking way longer than it should? In other words, have the powers that be figured out how to keep the music playing better than ever? The Fed must have inflation & will do everything possible to create it. Central banks as well as markets have become aware that monetary policy has limitations. And the gold price is sniffing this out.

A Stock Market Correction Has Only Been Postponed, Not Avoided

Markets are relieved that the Fed won’t hike rates in March. But, the markets are never satisfied. Getting stock market expectations aligned with the intended FOMC policy path will not be pretty. Expect higher volatility and stock market drawdowns in April and May as markets reprice. A further stock market correction has been postponed, but not avoided.

Negative Rates Confirm The Failure Of Globalization: Deutsche Bank

Negative interest rates may or may not be a thing of the past, but the confusion about their significance remains. Here is Deutsche Bank’s Dominic Konstam explaining how, among many other things including why Europe will need to “tax” cash before this final Keynesian experiment is finally over, negative rates are merely the logical failure of globalization.

Volatility Frustrates Traders: No Rational Explanations On What’s Going On

Traders are frustrated in a market where nothing makes sense. A casualty of this current volatility is that at any given time there are no rational explanations for what’s going on. Back & forth swings of meaningful proportion are characterized, by necessity, with a random reason generator. Better to just put it down to simple things like China’s economy or European banking system is collapsing.

Inflation - The Fed's Nightmare Scenario Is Becoming Reality

Higher inflation is not a dream come true. It is the Fed’s worst possible nightmare. It will expose the error of their 8-year stimulus experiment & the Fed’s impotence in restoring health to an economy that it has turned into a walking zombie addicted to cheap money. If inflation catches fire now, with growth close to zero, the Fed will be completely incapable of controlling it.

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