Many would like to perceive the pause in interest rates by the US Federal Reserve as a bullish take for markets at large. However the forward direction by Powell signals towards the bigger picture; inflation cannot be stopped by the Fed.
March 2022, shortly after the invasion of the Donbas region by Russia the Fed began significant hikes in the Discount rate. See comparaison to SPX.
This has put pressure on domestic and international markets. As foreign central banks try to follow along with hikes to avoid capital outflows, they have not been able to keep up. The international value of the US Dollar has risen considerably since January 2021, the trend accelerating as flight to quality has driven capital towards the US in the face of war. See below US02-year and US10-year treasuries plotted on the same axis, compared to the US Dollar Index.
During this time, the price of gold
GC1!
has made a few rallies towards the 2011 high, relating to geopolitical and sovereign risk.
This price level in gold could prove very significant moving forwards. The market has indicated towards a long-term trend. It should be noted, that entities involved in potential geopolitical conflicts will move assets accordingly in advance.
It is inevitable that war will continue to escalate, and so long as it does inflation will persist across the globe. In spite of capital flows towards the United States, global scarcity driven by shortages, insurance rate increases, impaired logistics and corrupt governments will continue to erode the domestic value of the dollar. The inflation we have been experiencing is war inflation, and no central bank has the power to stop the reactionary shock in financial markets that occurs when capital must seek cover.
There appears to be political turmoil in Russia, but the question unanswered is why? It must be understood, that there is a strong belief in Russia that Putin has been too restrained by only invading the Donbas region. What is being stoked by NATO, is an ethnic conflict. Subtle difference in language and religion separate two relatively new nations, Russia and Ukraine. Kyiv the home of the Russian Orthodox church, established in what was the capital of a greater empire, collapsing in the late 1800s. That is to say, the contested regions in this war are hotbeds for an ethnic conflict. Paramilitary groups in Russia and Ukraine (of which there are many) have quite a well known and gruesome history between them, despite receiving little attention since 2022.
With neither government viewed at large as capable, there is a massive tailwind risk with the US' approach to funding. It seems well established by now there is nobody accountable for how the weapons and munitions being shipped to Ukraine are being handled, and Nazism is rampant in the army. In addition to repeated attempts on Putin's life, the US is now discussing giving Zelensky of Ukraine access to nuclear weapons.
With a "coup" having now taken place, it must be clear that there is a quickly growing threat of war escalating quickly. No attempts at negotiation have been made by Ukraine, despite massive loss of life on both sides. Therein lies our why. Consider the paramilitary groups are now willing to march against Moscow, what prevents them from marching on Kyiv? The negotiation between them has been settled, a new leader appointed and separation from the Russia government is complete. The dogs of hell let loose.
Gold, Silver
SI1!
and mentioned in a previous post, Natural Gas
NG1!
, are all forming lows after making new major highs. Inflation will persist and push the nominal price of gold up, but capital flows will nullify that effect to NY COMEX gold prices, as
GLD
follows. This market is pushing towards a significant breakout, and this will move the price as global markets respond by moving capital. Gold becomes a target for flight to quality at this time.
Friday was an ideal major low, the market may continue to make minor lows but a sustained rally to 2000 and beyond should be considered a bullish sign.
March 2022, shortly after the invasion of the Donbas region by Russia the Fed began significant hikes in the Discount rate. See comparaison to SPX.
This has put pressure on domestic and international markets. As foreign central banks try to follow along with hikes to avoid capital outflows, they have not been able to keep up. The international value of the US Dollar has risen considerably since January 2021, the trend accelerating as flight to quality has driven capital towards the US in the face of war. See below US02-year and US10-year treasuries plotted on the same axis, compared to the US Dollar Index.
During this time, the price of gold
GC1!
has made a few rallies towards the 2011 high, relating to geopolitical and sovereign risk.
This price level in gold could prove very significant moving forwards. The market has indicated towards a long-term trend. It should be noted, that entities involved in potential geopolitical conflicts will move assets accordingly in advance.
It is inevitable that war will continue to escalate, and so long as it does inflation will persist across the globe. In spite of capital flows towards the United States, global scarcity driven by shortages, insurance rate increases, impaired logistics and corrupt governments will continue to erode the domestic value of the dollar. The inflation we have been experiencing is war inflation, and no central bank has the power to stop the reactionary shock in financial markets that occurs when capital must seek cover.
There appears to be political turmoil in Russia, but the question unanswered is why? It must be understood, that there is a strong belief in Russia that Putin has been too restrained by only invading the Donbas region. What is being stoked by NATO, is an ethnic conflict. Subtle difference in language and religion separate two relatively new nations, Russia and Ukraine. Kyiv the home of the Russian Orthodox church, established in what was the capital of a greater empire, collapsing in the late 1800s. That is to say, the contested regions in this war are hotbeds for an ethnic conflict. Paramilitary groups in Russia and Ukraine (of which there are many) have quite a well known and gruesome history between them, despite receiving little attention since 2022.
With neither government viewed at large as capable, there is a massive tailwind risk with the US' approach to funding. It seems well established by now there is nobody accountable for how the weapons and munitions being shipped to Ukraine are being handled, and Nazism is rampant in the army. In addition to repeated attempts on Putin's life, the US is now discussing giving Zelensky of Ukraine access to nuclear weapons.
With a "coup" having now taken place, it must be clear that there is a quickly growing threat of war escalating quickly. No attempts at negotiation have been made by Ukraine, despite massive loss of life on both sides. Therein lies our why. Consider the paramilitary groups are now willing to march against Moscow, what prevents them from marching on Kyiv? The negotiation between them has been settled, a new leader appointed and separation from the Russia government is complete. The dogs of hell let loose.
Gold, Silver
SI1!
and mentioned in a previous post, Natural Gas
NG1!
, are all forming lows after making new major highs. Inflation will persist and push the nominal price of gold up, but capital flows will nullify that effect to NY COMEX gold prices, as
GLD
follows. This market is pushing towards a significant breakout, and this will move the price as global markets respond by moving capital. Gold becomes a target for flight to quality at this time. Friday was an ideal major low, the market may continue to make minor lows but a sustained rally to 2000 and beyond should be considered a bullish sign.