INFORMATION ON BREXIT

 

# Note added 11th April 2016

Monday 4th April  was an ambitious date to commence publishing on  an issue of enormous international interest.  Publication will commence when the information framework has been designed and tested as a useful resource, 

Posted on March 30th 2016  Commencing  Monday 4th April . This website will, as a content aggregator, publish links to news and commentary on the 23rd June British Referendum on either remaining in or leaving The European Union.

 

 

 

 

CENTRAL BANKERS PUSHING ON A STRING, ALGORITHMS & MOMENTUM

Note added 11th March 2016:

Jose Vinales  Director of thw IMF’s Monetary and Capital markets department supports negative interest rates introduced by some central banks “given the significant risks we see to the outlook for growth and inflation”  Link to article in IMF Direct

Why are central banks using negative policy rates?

Once policy rates are cut to what used to be known as the ‘zero lower bound’, central banks can employ unconventional monetary policy measures to provide further stimulus if real interest rates are still above the levels consistent with price stability and full employment. Negative nominal policy interest rates are the latest addition to this unconventional toolkit. Six central banks so far have introduced negative rates that apply to some amount of the cash balances commercial banks hold with the central bank (Table 1).  Negative rates aim to encourage the private sector to spend more and support price stability by further easing monetary and financial conditions. For smaller open economies, negative rates can also help discourage capital inflows and reduce exchange rate appreciation pressures.

Rev Table 1 with new Sweedish Bank Date

 

Reposted by John Katz from The Goldwatcher

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THE BRITISH  RED CROSS SYRIA APPEAL

GOLD PRICES FROM JANUARY 2016 TO 10th MARCH

CHART COURTESY WWW.KITCO.COM

Are Central Banks Pushing on a string?

In the first west week of January I posted this Goldwatcher note

 “Gold is insurance against the unexpected and the unthinkable. Gold is  poised to breach the psychologically and technically important $1100 threshold…Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades  – i.e. the speculative punts that  can account for most the money flowing in and out of gold”

The global risk landscape this time last year was fairly tame  and I posted several comments on gold price prospects for the year that proved to be useful.  The landscape this year has been different and recent posts on gold have included  Ray Dalio on Central Banks Risk Pushing on a string 

Messages from The Goldwatcher Book:

 

The manuscript for The Goldwatcher was submitted to the publisher, at the end of 2007. At the time the gold price was a little over $800 – about double the where it was when I first submitted the book proposal to Wiley.

 The Goldwatcher (Page 186)    included this comment under the heading

Messages From History

.”…Pundits had been calling for the Gold Price to reach $850, the level it spiked to in 1980. That’s equivalent to about $1900 in 2007 money. However a price spike and a price average over a longer period are very different situations. “

As we all know the price  spiked to above $1900 in September 2011, fell again below $1100 in January this year and is now in sight of breaching $1300.

Motivation, Strategy & Timing

My contribution to investing in gold has been based on motivation strategy & timing. Yesterday’s dramatic responses to ECB President Draghi’s package of stimulus measures was followed by dramatic prices movements  that are settling down today  with these among  other price changes:

GOLD +0.60%,   COPPER+  0.68%

OIL + 2.27%, LEAD +1.15%,, ZINC +1.61%

 

MOMENTUM, ALGORITHMS & ANIMAL SPIRITS:

Price overshoots and undershoots are par for the course in currency and commodity markets.  As it’s likely that  future  price  movements will also be driven by momentum, algorithms and animal spirits it will make sense for  investors to monitor these influences themselves or keep well informed  from a reliable information source.

The Goldwatcher. Page 187 following addresses past consequences of price overshoots.

 

All postings on this blog  (The Goldwatcher) will remain freely accessible in the public domain. For further Goldwatcher comments please follow Investor Literacy

goldbook-book.png

 From previous Goldwatcher postings:

IS THE BIG SHORT NARRATIVE THE BEST EXPLANATION OF THE FINANCIAL CRISIS

  LINK TO VIDEO OF BROOKINGS PANEL DISCUSSION

The film has provoked an intense conversation, sparking a discussion of whether mortgage-backed securities were the primary driver of the crisis, as opposed to broader economic forces and whether those responsible were adequately punished.

On Wednesday, January 27, the film’s director, Adam McKay (who also directed and co-wrote “Anchorman,” “Talladega Nights,” and “Step Brothers”), visited Washington for a screening of “The Big Short” hosted by Economic Studies at Brookings

After the screening, McKay joined a panel of financial experts and journalists to discuss whether the film’s narrative is the right one to explain the crisis to the public…”

  LINK TO VIDEO OF BROOKINGS PANEL DISCUSSION

 

$5.5 TRILLION NEGATIVE YIELDING GOVT BONDS

# 5th February :  Above  Chart added reflecting negative Govt Bond Yields  across the yield curve notified by  The Daily Shot 

## Note Added 3rd Feb 2016:  Link to Bloomberg Quick Take on negative interest rates  – Link to Goldwatcher comment on the end of the long term debt cycle and negative interest rates

The total balance of government bonds with negative yields hit $5.5 trillion after the BOJ action on Friday according  to JPMorgan (via the Financial Times) and noted in The Daily Shot letter today

I posted a comment on www.thegoldwatcher.com   yesterday on approaching the end of the debt supercycle that started with the end of WW2 over seventy years ago. The comment addresses Ray Dalio’s warning that policy makers could find themselves pushing against a string.

Monetary policy works with a lag. When central banks were fighting inflation the analogy of pulling a stone with an elastic band was a popular way of explaining  the lag – you pull and pull and nothing happens ….. then the elastic tightens and wham,  the stone rockets back!

What happens when central banks find themselves pushing against a string?   Trillions of dollars and other currencies with negative yields?