Huston, we have a problem.
Yesterday the RBA stepped up with an offer to purchase A$3 B in 3 year bonds. Unscheduled.
At least A$2 B was taken up. Yield curve control in play and the RBA was first mover, hence the collapse in the AUD.
A$POG closed in the green this morning. Gives you an idea of how far the AUD fell.
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There are suggestions there could be a rate rise as early as this year. CB's everywhere are in denial and trying to placate the market.
If oil heads towards US$100/barrel (some analysts), food and commodity inflation continue to motor then CB's may have no choice but to raise rates to tame inflation and spending. Tax hikes are likely to come first but then the property sector may plunge which is how main street 'feels' how the economy is going.
https://qldpropertyinvestor.com.au/australian-housing-prices-fall-as-coronavirus-infects-property-market/If employment does not pick up with the removal of the COVID supplements, particularly jobkeeper, inflation expectations and bond yields continue to rise and the RBA is forced to lift rates, the property market could be in for some real grief. Pressure will also be applied to improving wages.
Keep in mind mortgage rates are umbilically attached to the 10 year yields in the chart above.
Is control slipping?
I recommend you read every headline article in Goldseek, as nearly all are about the bond market and implications.
Here is a taste.
https://ca.finance.yahoo.com/news/global-bond-rout-extends-asia-222746094.htmlhttps://www.investing.com/news/economy/take-five-policymakers-under-pressure-2431444We are in for a hell of a month until the CB's, markets and investor sentiment stabilise.
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As far as gold is concerned, the magic percentage is 1.5% which is the current YOY inflation rate and if bond yields hit 1.5% then real rates = 0. Don't worry about the rhetoric - this changes to suit the meme for the day. At the moment it is opportunity cost of holding gold or the USD.
Gold as a safe haven is beginning to manifest.
Gold price drops are seeing a major increase in Asian demand but apparently, physical shortages are producing delayed delivery.
https://www.reuters.com/article/asia-gold-demand/low-gold-prices-spark-flurry-of-activity-in-india-idUSKBN2AQ23U?edition-redirect=inSomething is going to give. And it won't be gold.
