>people are nervous but rates are low and by the looks of things...

>people are nervous but rates are low and by the looks of things possibly going lower.

Maybe in Australia and NZ (1%) but in the US its double at (2%). Why would you invest in a dodgy foreign country at the bottom of the world when you can get twice the return in the US? In the past, the reason has been due to higher interest rates and exposure to China. Now Australia has lower interest rates and exposure to China with the trade war and Hong Kong troubles is a bad thing. The AU interest rates have always followed the US interest rate like a lost puppy. Now we have diverged. Either we have got the jump on the US and they will lower their rates to match, Or we will be in the situation where we have to increase our interest rates to defend the falling AUD (67.5c down from 80c, 2 years ago). This would cause stagflation. The other alternative is that something has changed in the dynamic and the AU is no longer a vassal state of the US.

While I am sure the FED would love to reduce interest rates and hand out lollies at the same time the problem is that there is growing competition to the US's reserve status. The US has had 10 years to sort it self out after the 2008 GFC with emergency low interest rates. They have played all their tricks of loading students with debt etc. But now it's crunch time. This is the second attempt to normalise interest rates. If they reduce their interest rates now when are they going to "normalise" their economy? People will just give up on the USD. Gold is a good alternative. (see the warrant pmgold.asx at the perth mint)

In short I can see why everyone thinks the interest rates will drop a second time. After all they have done it before in 2008. But some thing does not smell right. The gold price reflects this.

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