Australian dollar rides the golden bull

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was down last night as EUR popped:

The Australian dollar caught the bid again:

As gold went wow:

WTI is pressing higher but Brent is stuck fast:

Metals MOAR:

Big miners were soft:

EMs stocks pushed for breakout:

With junk:

As US yields crumbled:

US stocks piled it on. Europe is crushed by EUR (hello ASX):

The only chart that matters kept on keeping on:

It is fair to say that the gold bid is also playing a part in AUD strength given it is 10% of the terms of trade. However, the AUD is not fully riding the gold bull. It more has it on a stretched leash:

Which boosts the case for local gold mining equities.

David Llewellyn-Smith
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Comments

  1. David, what are the chances of a major insolvency crisis arriving in Q4, causing another huge leg down in markets including gold?

      • I took a few diggers/exploration co’s and juniors on small positions recently just for giggles basing my case on what happened in 2011, closed futures for now for profits and hoping there is a pullback on a chance of +ve real rates at some point causing a profit take. The only thing the markets (all markets) seem to give a st about is stimuli, and then when that ends, there’s the massive TGA to come ie, I don’t even know when a good time to exit is because it seems there will only be MOAR from who knows where after that – maybe the Fed, as there are still “tools” the Fed can use.

        • There are plenty of ‘tools’ at the Fed but few of them are useful for anything.

          Ctrl +P ad infinitum. It will never end – you’ll be lucky to see it even pause.

    • Why would gold crash because of an insolvency wave?

      That’s anti intuitive. An insolvency wave just ensures even more stimulus…. and more after that. Stimulus won’t end until a major inflation event overwhelms the economy.

      • two plus twoMEMBER

        An insolvency wave would (normally) be deflationary, lowering asset prices as the value of cash increases. A currency crisis at the same time as a wave of insolvencies would complicate things, and gold could be valued as a safe haven…

        • Added to which, it should be clear to anyone with a pulse that at the first sign of crisis the printers are cranked up to warp speed — it’s basically become a standard response these days. Gold can easily correct in such circumstances but it won’t crash 20%+. Ultimately it boils down to: what would you rather own – something that’s scarce and difficult to come by or something that can be created in unlimited quantities at the flick of a switch.

      • I would like that explained but it has happened.. gold drops into a crash. I can only explain it as perhaps people look to sell gold first to back stop losses on other contracts? I dont know why.

        • We saw it in the GFC and we saw it recently – gold crashed as leveraged players liquidated profitable positions to cover losses on other positions / raise liquidity – lasts about 5 minutes (metaphorically) then rallies again as the stimulus flows.

    • In which country? Maybe in the US, not Australia. I understand in Australia new insolvency laws extend the life of a dead company to six months, allowing them to spread their poor credit more widely through the system like a virus and remove the incentive for creditors to initiate wind up in a short time frame. What creditor in need of money has the time to wait 6 months to initiate wind up?

      • It’s retarded, agreed. Leading to a litany of unintended consequences – another piece of poor policy. Creditors get rooted instead and their businesses fail? Wtf.

  2. Australian housing doubles in value every 7-10 years. Silver doubles every 7-10 days*.

    * past performance should not be taken as a guarantee of future performance.

  3. I’m sticking to my prediction that Trumpy is going to set up a massive crash in Sept/Oct and try to blame it on Biden as a Hail Mary to scare people to voting for him- saying its 100% due to the risk of Dems clean sweep. It’s the key demographics he needs that swung away from him that are most affected – suburbs, older voters, wh1te college degrees.

    • I figure that its not that he is credible but that information providers such as news channels are seen as having zero credibility. A message Trump repeats daily.

    • Man what Scott Adams says about different movies playing in the head is totally true.

      I feel like Trump is going to crush it. Even a 59 state clean sweep is possible.