Macro Afternoon

See the latest Australian dollar analysis here:

Australian dollar now a golden rocket

by Chris Becker

Boom! There goes gold…

Boom! There goes silver…

Boom! There goes Bitcoin…

Asian stock markets have opened in mixed fashion to start the trading week with all activity overshadowed by all the moves in undollar assets, lead by gold – now above its previous record high, dragging silver and Bitcoin, which gapped up above the $10,000USD level. The Yuan and Euro rose against USD as well, while the Australian dollar finally found some strength after its Friday night selloff.

In mainland China, the Shanghai Composite is up a handful of points to 3203, trying to recover from near 4% falls on Friday. Meanwhile in Hong Kong, further worries about the spread of coronavirus has seen the Hang Seng Index off by nearly 0.5% to 24587 points. The daily chart shows key daily ATR support ready to fold and turn this small dip into a wider correction:

Japanese stocks finally reopened after a very long weekend, but did not fall as expected with the Nikkei 225 closing only 0.2% lower to 22701 points. The USDJPY pair however broke its Friday lows to be in the 105’s again, currently at 105.60 in a very oversold state:

The ASX200 was looking to break below the 6000 point psychological level but instead was buoyed by commodity stocks and gold miners to finish 0.3% higher to 6044 points. The Australian dollar lifted straight through the 71 handle and is making some minor gains thereafter going into the City open, staving off a wider selloff from last week:

Eurostoxx and S&P futures are relatively calm with the former up 0.2% while the latter is still looking to break down below key support at the 3200 point level, with the NASDAQ about to break its own three week long support level too. Wall Street is curiously poised here and bears (sic) watching this week:

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Comments

  1. CHINA …

    A Look Inside The $52 Trillion Bubble That Has “Hijacked China’s Economy … Zerohedge

    https://www.zerohedge.com/markets/look-inside-52-trillion-bubble-has-hijacked-chinas-economy

    More than three years ago, we explained why “the fate of the world economy is in the hands of China’s housing bubble.” As we said at the time, “China has always been a serial bubble inflator courtesy of a closed (capital account) economy, and nearly $30 trillion in bank deposits [$40 trillion as of July 2020] which slosh from one asset class to another, be it the stock market, bitcoin, commodities, farm animals or – most often – housing. ”

    Why is it so important for China to consistently reflate this bubble? The answer is simple: for China’s middle class there is no more important asset than housing: as Deutsche’s Zhiewi Zhang wrote in 2017 when discussing the macro and market consequences of the Chinese bubble, it is nothing more (or less) than “a massive wealth effect.”

    Furthermore, unlike the US, which is hyperfinancialized and the bulk of household net worth is in financial assets (less than 30% is in real estate), in China it is the opposite, and roughly three-quarters of all household worth is in real estate. … read more via hyperlink above …

    • China was just copying the U.S. and Atlantic model to offset its financial wealth creation in the global market, hence Chinese investors deploying capital internationally to gain property rights abroad E.g. sorta like Japan back in the day, but not exposed to Plaza like machinations. The U.S. blew itself up due to maturity in its C/RE markets which lead to turning a blind eye to endemic control frauds and predatory loans. Where the GFC was entirely an Atlantic event due to China’s later even horizon and more authoritative state function over the private sector. Like it or not because of old wounds, but if for not China post GFC the West would have been a smoking crater due to supply and demand.

      I’ve got no dog in the hunt one way or another … tis thingy …

      On another note a bloke like you must be finding it difficult considering PM Jacinda Ardern’s numbers, phew 10 years is like a million, how do you spin that.

        • Does nothing to reconcile what I said above E.g. different markets have different dynamics in relationship with others due to synergies. Throw corvid into the dynamic and oh look someone put mister hamster in the microwave and now we have a balloon …

          Sigh … you were pushing draining mangroves back on the sunshine coast in the day to build RE … wow …

          • DominicMEMBER

            “… its inherently deflationary..”

            Indeed it is – and you wouldn’t want that would you — after all, what moron wants lower prices. Oh wait …

            The only people who want inflation are the pollies (to inflate away those awkward debts they keep running up and boosts CGT revenue as assets inflate), the super-rich as it inflates all that RE and equity they own, while destroying their debts and the dingbat property specufestors who’d like the same. Inflation suits the greedy and the corrupt — savers, not so much.

            But I guess, in a Keynesian world, savers should be euthanized, dirty scum that they are.

            Any right-minded person should see that inflation is no friend of the poor. Agreed?

          • Your kidding Dominic … I don’t support the targeted 2% Friedman quasi gold standard and on the record for supporting a JG as a buffer stock over the so called “natural rate”.

            As far as prices and purchasing power goes I think your lot should go look into the mirror for arguing the corporatist line which crushed wages, sent executive remuneration vertical, ginned up equities [skin in the game], enabled hyper capital inflows and supernational ownership of primary industries and resources, but yeah gold …

            PS stop saying Keynesian when you mean neo new aka neoclassical with Taylor rule bolt on. Keynes would not have any of this rubbish and if still alive today would reduce the likes of Krugman to a quivering and drooling imbecile.

        • Surely you stopped reading at the US having 30% of their wealth in housing and the remaining in finance. Seriously Hugh – do you think the US stock market and banking system is legit ?

          IF there is one thing you can absolutely put the house on its the US financial system breaking down and leaking contagion all over the world again – we are a factor of at least 6 times worse off than the last meltdown.

          US can’t sustain this, its already collapsing. Shift to global gold standard will happen within 8-12 months – possibly sooner with the election.

          The only cards they have left are Semi-conductors which they have now realistically lost control of and their military. Military wont save their economy – its as bad as Australian thinking we can just rely on Iron Ore – China can never be without us. Possibly the single dumbest thing I have ever read in my life anywhere on the internet.

          • Lmmao at gold standard… wtf are people smoking … its inherently deflationary and after decades of mistaking persistent deflation as a victory of fighting inflation that would provoke a global depression event … wheee ….

  2. Chesser Senegal gold explorer (CHZ) in a trading halt today pending announcements on assays pending. I bought in a week or so ago. I gave the tip last Thursday on here. Nice!

        • DominicMEMBER

          Diversification is a concept that is perennially misunderstood by both retail and professional investors alike.

          If you buy a stock market index you are certainly diversifying – but it’s the equivalent of backing every horse in a race. If you want to make serious money and have conviction on a particular trade, then go all in. (Not something I’d recommend for the amateur punter, I confess, but among every knowledgeable professional understands this).

          Real diversification amounts to putting your money into a specific sector, not a single stock. If you put all your money into Enron stock then … you deserve all you get.

      • Who wants silver as a store of wealth.
        Who wants gold?
        How the fk do you get off these trades given the underlying value is just ‘what it is’?

        • Me me and about 4 billion other people want it and tons of hedge funds and other funds are loading to the max.
          I’ll call my boat “what it is”.

          • I don’t know how anyone could answer otherwise.

            Gold = limited supply. USD = unlimited supply.

        • Yeah I don’t get it either … every collapse fear afflicted dog piles in and the magic gold stuff crashes harder historically than anything else, past the post due to the fear [tm] factor velocity going to zilch. I mean historically it was a way to negate state overheads with perishables at taxes and allow state control over its own currency – the good, bad, and ugly.

          Then when one considers all the the historical fraud in the industry if one is invested in equities based on it, reminiscent of magic holy waters or some other contrivance. I mean how many nations in history went down the gurgler over the stuff … sorry citizens were going to have to sell you all off for medical experiments for we blew our load against the wall having a good time … cue musical dance scene ….

          • BigDuke6MEMBER

            I’ll explain. You’re either a goldbug or not
            If you are you believe gold will return to its historical value such as in feudal times which is where the normal historical balance in society lies. The world wars caused a shortage of manpower so wealth had to pay more. Now with unfettered immigration the balance will swing back and gold will go back to historical levels. Depending on where you stand about $3 to $4000 an ounce.
            So that’s what you wait for….. maybe

          • Your joking right?

            I know more about gold than you ever will because I took the time to study it, without any demand pull to institute some ill informed bias because I thought I’d make packet. My family owns a few hundred thousand acres of gold bearing geo along with other minerals like copper. Was running a small ball mill and processing plant in the 70s as a kid, still running mercury traps at the end.

            That aside nothing you just said is historically accurate, firstly it was a monetary tool of the state and not some ideological freedom giver, not that contracts proceed any monetary token in exchange. Lastly gold is a narrow market that is more susceptible to price signals of a few, than the many, hence the claims of its traders to think is a bar in the market, when its has very little to do with actual trade in any productive enterprise. Its just a toy that some traders make packet on due to its inherent volatility and nothing else.

            At the end of the day if gold was the safest store of value then why do some sell it into a panic market, would be irrational to sell, all would buy and then what kinda of market would that be – everyone sells other stuff to own gold … chortle …

          • Ahh that explains everything Skip. Did you per chance play in the mercury traps as a kid? 😉

            Gold volatile you say? Please tell me the average return over the let’s say last 15 years in AUD?

          • Groan … its in AZ … btw thanks metal bugs for frothing the market post GFC so I could sell all my gold at a historical high.

          • DominicMEMBER

            Don’t fight it, skip. As I said to another above, gold and silver have been deemed valuable by humankind for 5,000 years — are you arrogant enough to say that all these (millions of) people are wrong and you are right?

            It’s an argument you can’t win – the market is a voting machine and guess what — you’ve been out-voted. Your opinion rendered utterly irrelevant.

          • DominicMEMBER

            Skip, if you think gold is at its highs for this cycle you don’t grasp even basic economics.

            As Pensum very simply (and kindly) explained to the uninitiated above:

            Gold supply increasing at 1.5% per annum
            US Dollar supply increasing at over 20% per annum.

            Geddit?

          • lmmao at QTM see – https://www.nakedcapitalism.com/2020/07/ilargi-what-default-where-dollar.html

            This is made even more surreal due to the abject failures of your lot post GFC and repeat my thanks for the psychological buffing of its price so I could cash out. So in light of that how was my purchasing power negatively effected, because at the end of the day that is what your suggesting when in reality it was just the opposite.

            The only reason some push this meme is because their ideology demands it, cornerstone too it, and without it the whole thing crumbles into dust. Best bit is these sorts never mention if gov sets the price again or will it be allowed to float and cop all that portends, yet still bang on about purchasing power …. errrr … then pretend to talk about economics.

        • No need to trade gold…….you own gold like you own your own house……….you don’t trade the house you live in. It is just another safe liquid instrument. At some stage the Fed will sell paper gold but they will choose their time, could run until the Fed looks like it is control again…….when in the future they finally really lose control they will re-collateralise their balance sheet with it.

          This current run in gold started back in October 2018

          https://alhambrapartners.com/2020/07/21/exposing-the-golden-lie/

          • DominicMEMBER

            Nyleta, the Fed can sell all the paper gold it likes — if the buyers of the Fed’s sales stand for delivery you have one of the biggest defaults in futures market history on your hands. Conspiracy theories – forget them …

        • I was having a disagreement with Dominic in another thread on the value proposition. He believes it is “what it is”, “gold is money not a commodity”, etc.

          I own a proportion of gold and silver as insurance vs inflation risks on my cash savings. I see it as purely insurance rather than an investment, and I would not have bought it unless I could quantify a floor price. Last time I researched, the mining costs for silver was a bit under $10USD per ounce, and around $1100USD per ounce for gold. The floor price seems to be the mining cost plus a bit. On top of that is the perceived risk of inflation, NIRP, bail-in, war, etc, and on top of that seems to be the tulip mania “prices will keep rising just because”.

          • DominicMEMBER

            No disagreement, Freddy, I was just telling you like it is. And what I said I was not pulling out of my ar$e either — I’m a finance professional, with years and years of grinding away on a trading floor. I get schooled often by people with medical degrees (well, they’re obviously more intelligent so would know more than me – about anything), but markets are a funny thing — the mistake people make is trying rationalize every move. It’s like they’ve been schooled by listening to the media for too long — did you ever hear Alan Kohler telling the audience that the stock market fell because it was technically overbought? Of course not – because his audience has no clue what that means, so he invents a rationale that the public might find plausible: “Concerns about … blah blah”.

            Financial markets are not as simple as you think, Freddy, and gold is one of the most misunderstood assets by the public and investors alike. There are still analysts out there who talk about “Indian demand” influencing prices, when Indian demand is irrelevant. Pretty much all the gold ever mined in history is available as supply today — it is money, it should be analysed like a currency, not a commodity.

            I don’t care two hoots if you disagree, I’m just trying to be helpful.

          • If you can’t quantify it then you are not being helpful.

            Grinding away on the trading floor means what exactly? That you know how to buy or sell shares on behalf of a customer?

          • I am GrootMEMBER

            Yours seems like a fairly sensible take on it. An acquaintance of mine likes watching some of those gold hunting shows on free to air. They generally seem to involve get rich quick hopefuls using environmentally damaging practices to extract tiny amounts of gold from massive volumes of earth/rock/seabed, which they then eagerly exchange for……US dollars.

            It’s all a bit bizarre to be honest. I don’t know that I’m against it, arguably pointless environmental degradation aside, and I understand the arguments along the lines of gold being true money. But what is it that makes that true in anything other than the minds of believers? Like any number of other items that neither deliver nor promise a future income stream, it is worth whatever someone is prepared to pay for it at a point in time.

            It almost seems like something akin to a religion. But hey, religion works for many.

          • The currency debasement argument has a lot of merit to it, and want I am insuring against. I certainly don’t believe Dominic is being religious or fanatical about it.

            Where we disagree is that when real interest rates turn positive that precious metals tend to revert closer to mining cost (which is essentially the realised inflation of oil/machinery/labour/etc rather than forecast inflation). The further we drift from current mining costs then the more difficult it becomes to determine fair value.

            That doesn’t mean those people who are predicting prices to the moon are wrong. I am actually hoping they are right.

          • I am GrootMEMBER

            Good point about the interest rates and production pricing relationship. In spite of my puzzlement, real world observation tells me that gold has a role in an investment portfolio. The religion reference is not intended to be disparaging, but rather reflects my perceived difficulty in establishing a workable and logical framework for valuation. I probably over-analyse it, which makes me my own worst enemy.

            I should just go with what works. Had I done so over the years, I’d be a lot wealthier than I am.

        • World is going to go to a gold standard. The entire fiat system was based around legitimacy and trust. That has been entirely wiped away and fiat currency, particularly US reserve, has been entirely weaponized and the very basis for its ability to function is gone – it simply can not continue in any meaningful or legitimate way.

          Its gone.

          The likely hood of a transition to a global basket of currency with gold all traded as a crypto with no single reserve to create a globally fair currency is now almost certain.

          Will happen within the next 12 months is my view – banks, reserves, corporations are all preparing for it already. If you can’t see this then you probably shouldn’t be in this game.

          Its already been decided.

          • Diversify away from US denominated investments which have counters in EU Asian markets. Hong Kong markets have gone completely ballistic – China, Japan, Hong Kong, Singapore etc are all trading already in new testing crypto. Jack Ma just unveiled the worlds single largest listing in Hong Kong.

            So while this blog has been pushing the anti-Chinese rhetoric for years – and China will fail, it has been very clear it is the US who is in deep systemic trouble.

            The simplest thing is to look at each countries people – China is now a country of 1.5 Billion with an highly educated, highly skilled population who are all engaging in high tech pursuits – the US is trying to leverage impoverished migrant mexicans, its entirely game over.

            As someone pointed out the only option for the US now is military – and that will be their Suez moment. They are done – stick a fork in them.

            Get exposure to Europe, Asia, China, Japan – Australia will be fine for 12-18 months then we will be switched off entirely.

          • Know IdeaMEMBER

            Thanks Swampy. As usual, you are (at least) one step ahead.

            Looking forward to the answer to your question.

            Edit: gawd. Rasputin has replied. Let me see if I can parse that.

          • DominicMEMBER

            As a broad supporter of a gold standard (and one that is way too heavily invested in the sector) I’d like to agree but I really can’t see the authorities ‘voluntarily abandoning’ the current debt-based system — there are too many powerful people who stand to lose from such an action. My view is that it will be sustained as long as possible and then ‘replaced’ (however briefly) with an alternative fiat system (a global currency that would serve as a reserve currency — like the IMF’s SDRs, for example). Quite how this plays out will be interesting because the US relies on King Dollar to funds its vast military. In the end, I can certainly see a system in which gold has some kind of role, but even absent a gold standard, by the time this all plays out its value will have risen by orders of magnitude — by that I mean, gold owners real standard of living (by today’s standards) may have been largely protected while most of the rest will have dropped dramatically.

    • I wanted to buy last Friday and forgot. Went to buy this morning and there it is.. Trading Halt.. I traded them few times last FY and made good money. First I bought them when they were trading just over 3c.

      • With regard to your comment above SDR’s etc.
        What do you think about the possible likely use of USD as a weapon against the Chynese. As you point out the king dollar underpins the superpower status (and reach) of the USA, I can’t see them throwing that advantage out the window. What would be the effect of removing the swap lines given to friendly CB’s? Genuine questions.

  3. BigDuke6MEMBER

    I’ve said I’m all in gold here for my short existence here. NCM and SLR.
    In return can someone tell me what the motley fool triple down buy alert is ? Ads are getting to me.

  4. BigDuke6MEMBER

    Don’t know how fox portrays Australia in the USA. Had some redneck on reddit say I was a cuck and not free. Out of the blue , hadn’t even said anything to cause offense for once.

      • Keating, Reagan and Thatcher were cut from the same cloth. Vile puppets for neoliberal elites. Amoral opportunists and attention-seekers and shameless liars.

        Reagan was a reckless deficit-spender pretending to be a small government fanboy. Keating was an aristocratic snob pretending to be a working class boy, and Thatcher was the devil pretending to be a woman.

    • Mining BoganMEMBER

      Geez, that was truly awful. Is this the best the Scumburg lackies can do? It feels like there’s a whole middle of that incoherence gone missing.

      Oh, and whoever came up with Scumburg, I salute you.

    • How can anyone ever say Fairfax is ‘progressive’ when they publish pure tripe like that? That’s something out of Rupert’s own blessed mouth. Nine influence really showing.

    • “… couldn’t see where this dill has ever actually worked an honest day in his life.”

      Sums up just about every modern pollie. Where have you been living these past few years?

      In the days of yore, pollies were people who’d made it in life, retired early and felt they had something to contribute by going into politics. These days, people who have no hope in life go into politics in the hope they can get rich – and ride the taxpayer dime in the meanwhile.

  5. They have outdone themselves.

    https://www.betootaadvocate.com/entertainment/scott-morrison-names-michaelia-cash-as-the-newly-created-minister-for-karens/

    Scott Morrison Names Michaelia Cash As The Newly Created Minister For Karens

    “Senator Cash is the first Karen to hold the newly created federal ministry, and the first woman to go through a can-of-Schwarzkopf-Strong-hold-per-day to sit in cabinet since Fran Bailey MP.

    In a statement Cash said she was “incredibly honoured to be the first Karen minister for Karen Affairs, committed to working and walking together with our services workers, police, high school teachers, and retail managers to ensure that Australia’s Karens are well represented and supported at a Federal level, particularly during and after their public meltdowns are recorded on iPhones and posted on social media.

    The formation of the new department, as well as Cash’s appointment was announced in immediate response to three different public Karen incidents throughout Melbourne over the last week – where irrational suburban women with dense hairstyles that defy gravity were fimed abusing both police, government officials and minimum wage workers.”

  6. Maybe just me on a Monday night with a good Clare Valley red but tonight I seriously have no idea wtf any of the above comments mean. Normally understand some but didn’t even understand Dom, Skip (?), Mig or anyone. Maybe the Clare grapes had something else in them? Anyway enjoy the Covid days if you can.

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