The Gold price has risen $10 USD approx. last night. Gold shares were sold off on Friday as AUD was strengthening but gold had not moved but it appears that the Gold price has caught up last night. Silver was up more than gold as well.
The US Fed rhetoric has been hawkish with rate hikes which have turned to dovish due to the increasing employment numbers in the US but weak inflation and productivity which has the US fed stumped as this is similar to other OECD countries worldwide with the same conundrums. I watched a 4 corners episode and Peter Shiff YouTube video which raised the question of why the affordable health care act or Obamacare was in principal good but reality, not so good. With the affordable health care act in the US if you employ 50 or more people you have to pay benefits to your employees but many employers decided in the US decided to avoid paying these benefits by making the workforce casual and reducing the hours for each employee to avoid paying the benefits. So many Americans have to work multiple jobs but might be earning less and working fewer hours than they were before the Affordable health care which is why many Americans want the Obama Care repealed to a least have a 40 hour week job. There are similarities here in Australia which has seen the rise of underemployment and elimination of penalty rates on weekends. Hence a possible reduction in inflation and productivity while employment numbers are quite strong, such as working part-time is considered employed for the unemployment rate (%). I have just finished reading George Orwell’s Animal Farm and at the end of the novel I read a passage which states as the Pigs amongst themselves were celebrating which represents the one per centers (1%) they celebrated how they managed to get the farm animals to work more productively but for less feed which is eerily similar to conditions now. What you are seeing worldwide now is the rise of wealth inequality.
At the same time as the US Fed has been dovish, this has caused the AUD to strengthen against the USD which is up to .78 and possibility to go over .80 in the coming weeks. This raises the real prospect of the RBA actually lowering rates to weaken the currency when household debt is at all time highs which raises the ire of AHPRA and credit agencies such as Moody's and Standard and Poor's which have lowered the rating of Australian banks. I have now considered that the RBA may lower rates close to 0 or negative to ensure the cash rate is less than the US fed cash rate but I considered this a low probability but now a real possibility. If there is a correction in the Australian property market due to record debt levels then it could be very grim in Australia for quite a while.
In relation to the US Fed turned dovish the Dow Jones has reached record highs while results are tepid at best. Though 1/3 of shares on the Dow Jones have been moving upwards the other 2/3 have been falling. All I believe the US index of P/E ratios is quite near or if not higher than GFC levels. There is a lot of market unicorns in the US such as Blue Apron and Snapchat IPOs with big market capitalisations but not real net profits. I would also be watching the NASDAQ Biotech index which has more unicorns where companies have with no earnings are at record highs.
In the Eurozone, the Spanish banks look shaky and Italian Banks have been bailed out, in Canada, there is housing property bubble and high levels of debt and New Zealand appears to has its own property bubble as well while their central banks are increasing rates. Central banks worldwide have lowered rates to record lows and worldwide debt is also at record levels. There are many market bubbles emerging worldwide. Many reasons that Gold could go upwards going forward.
The rise of the one percenters
Jim Roger’s on the next market crash
Peter Schiff – Market Bubble/Obama Care been a failure
(20min delay)