Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Monetary Flood, Nothing At All, Then All at Once

Stock-Markets / Liquidity Bubble Feb 09, 2013 - 10:57 AM GMT

By: Adrian_Ash

Stock-Markets

Where money was tight, suddenly it's all arrived at once. Just like trouble does...

Everywhere we look, investors suddenly see nothing but blue skies, plain sailing ahead. Their change of heart makes us nervous, writes Adrian Ash at BullionVault.

New York's S&P index is back where it stood in July 2007 - right before the global credit crunch first bit, eating more than half the stock market's value inside 2 years...


Japan's Nikkei index has jumped by one third since mid-Nov., thanks to export companies getting a 20% drop in the Yen - the currency's fastest drop since right before the Asian Crisis of 1997...

And here in the UK - where the FTSE-100 stock index just enjoyed its strongest January since 1989, when house prices then suffered their biggest post-war drop - average house prices are rising year-on-year, even as the economy shrinks...

The common factor? Zero interest rates and money creation on a scale never tried outside Weimar Germany or Mugabe's Zimbabwe. Only the Eurozone has stood aside so far, and even then only a little. And yet gold and silver - the most sensitive assets to money inflation - are worse than becalmed.

Daily swings in the silver price haven't been this small since spring 2007. Volatility in the gold price has only been lower than Thursday this week on 15 days since the doldrums of mid-2005. Back then the Dollar also steadied and rose after multi-year falls. Industrial commodities outperfomed 'safe haven' gold too - a pattern echoed here in early 2013 by the surge in the price of useful platinum over industrially 'useless' gold.

Perhaps the flat-lining points to better times ahead. Gold after all is where retained capital hides when things are bad - a store of value to weather the storm. Or it may signal itchy feet in the 'hot money' crowd, now moving back into stocks and shares instead. But we can't shake the feeling that something awful is afoot. Gold and silver aren't making headlines today. Just like they didn't before the financial crisis began.

"Japan is on an unsustainable path of a strong Yen and deflation," wrote Andy Xie - once of Morgan Stanley, now director of Rosetta Stone Advisors - back in March 2012.

"The unprofitability of Japan's major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak Yen will likely be abrupt, involving a sudden and big devaluation of 30 to 40 percent."

Already since the Abe-nomic revolution announced in November the Yen has dropped more than 20% versus the Dollar. But "there is plenty of liquidity still parked in the Yen," Xie noted this week. Quite apart from the shock to America's trade deficit which surging shale-oil supplies deliver, "The Dollar bull is due less to the United States' strengths than the weaknesses in other major economies," he adds. And reviewing the last two major counter-trend rallies in the Dollar's otherwise permanent decline, "The first dollar bull market in the 1980s triggered the Latin American debt crisis, the second the Asian Financial Crisis. Neither was a coincidence."

Neither of those crises coincided with a bull market in gold or silver. Savers worldwide chose Dollars instead as the hottest emerging-market investments collapsed. But then neither of those slumps saw emerging-market central banks so stuffed with money, nor gold and silver so freely available to their citizens.

China's gold imports almost doubled last year, with net demand overtaking India for the world's #1 spot at last. This week the People's Bank of China pumped a record CNY860bn into the money markets ($140bn), crashing Shanghai's interbank interest rates by almost the whole one-percent point they had earlier spiked ahead of the coming New Year's long holidays.

The disparity, meantime, between the doldrums in precious metals and the bull market in Dollar-Yen trading can be seen by glancing at the US derivatives market. Yesterday the CME Group cut margin requirements on gold and silver futures. It raised the margin payments needed to play the Yen's lightening drop. One of those moves is likely bullish, short-term. But you'd to borrow money to choose.

Western pension funds are meanwhile pulling out of commodities, and just as liquidity floods back into the market. Both the Wall Street Journal and the Financial Times report how big institutions have quite hard assets "after finding they did little to protect their portfolios against inflation risk and the unpredictable returns of stocks." One of the biggest commodity hedge funds, Clive Capital has shrunk from $5 billion under management two years ago to less than $2bn today. And yet European banks - the major source of credit to commodities traders - are now reviving their commodities lending.

"The sector came close to panic 18 months ago," says the FT. But now "The banks want to be again my best friend," says a Swiss executive. "Funding concerns have now substantially dissipated," says SocGen's head of natural resources and energy finance, Federico Turegano.

There's plenty of money around to borrow, in short. Whether in Chinese banking, currency betting or commodities trading, where there was very little at all, suddenly it's all turned up at once. Which is just how trouble arrives. All that central-bank liquidity and quantitative easing has so far left consumer-price inflation unmoved, too.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in