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Gold Catching Knives & Headfakes

Before we speak about the Fed’s new governor, let’s discuss metals. The latest spike in yields is triggering fresh selling in metals. Ashraf made this curious tweet about falling gold ETF holing . Interestingly, gold/Ethereum ratio is at new lows and Gold/Bitcoin is near its lows. Below are the major declines in gold over the past 13 years. The question now is whether we will see a sharp rebound as we did in June 2012 before a renewed plunge as in Oct 2012-April 2013.

New Fed Governor Chris Waller made his debut appearance on Monday and his comments touched on a looming problem. The Swiss franc led the way on Monday while the euro lagged. US consumer confidence is due up next.

On the surface, the comments from Waller were a non-event. He repeated the standard Fed lines that it will be a long time before it’s appropriate to raise rates. He said that rising yields were a sign of economic confidence and he point to well-anchored inflation expectations. There were some hints he will be a more-hawkish governor but it’s way too early to judge.

What stood out though was that the topic of his first speech was central bank independence. Waller’s term runs until 2030 and he’ll surely going to be tested on that front.

The long arc of the last 35 years of monetary policy is towards lower rates. That means that by-and-large central banks have been an ally for treasury departments.

The next era – and we got a taste of that with Trump – will be a more antagonistic relationship as central bankers slowly raise rates or ar at least forced to adjust to contain rising inflation.

For politicians, that’s often a disastrous outcome. That push-and-pull has been clear in Turkey in recent years as the government meddles with central banking.

At the moment, the market is enjoying the confluence of easy money fiscal and monetary policies as global disinflationary trends converge but the crest of all those trends is near.

Tuesday’s US economic calendar picks up after a quiet day to start the week. A pair of indications on house prices will be a reminder of the new spending power of consumers.

 

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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