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Money Matters
- Chart of Interest - China PMI & AUD
- January 1st 2013 - Game Changer for Gold
- USD/JPY and JPY crosses - is this the retirement trade?
- Apple Inc - Far enough for now?
- NZD/USD - No one's talking about it!
- Interesting Snippet on US Oil Production
- NZD/AUD - Sunk by back-to-back poor NZ data
- Stunning Gold Chart - Gold on the Cusp of a Strong Rally?
- Update - the Graveyard - USD/JPY
- Physical Gold - the major new trend
- View archive...
Money Matters
Viewing entries tagged with 'Broker'
Chart of Interest - China PMI & AUD
Hi all
A lovely look at the components of yesterday’s Chinese Flash PMI. Note the big jump in export orders.
The 2nd chart is an overlay of the Chinese PMI plotted against the AUD/USD. 7 years of correlation suggest the PMI will lead AUD higher in coming days.
China PMI vs AUDUSD – click here to view charts
Cheers G.
January 1st 2013 - Game Changer for Gold
On January 1st 2013 the latest edict from the Basel Committee on Banking, an elite group of financial rule makers who’s task it is to define capital requirements and banking standards, comes into play. The new rule will be that Gold is attributed with First Class Asset status in the banking world ie any gold that a bank holds will be counted 100% towards the collateral of that bank whereas currently they can only count 50% of their Gold holdings in their equity totals.
So what does this mean for Banks, well for the first time in over 40 years they will be able to rate the Gold they hold in their vaults as a First Class asset and will therefore be able to lend 100% against it, of course this also means at the same time they will now no longer have to hold as much government bonds or mortgage backed securities and let’s face it both of these have had their reputations tarnished over recent years. Thus it will be no surprise to see Bank’s significantly increase their Gold holdings relative to the other First Class assets that they hold especially as part of the new rules has stipulated that Banks must increase their First Class Assets from 4% to 6% of their overall assets.
This move attributes to Gold an equal status as cash, in other words it once again becomes essentially a currency. This is a massive development and yet the mainstream media seems hardly to be noticing such a huge and potentially game changing story for the importance of Gold.
It is not surprising that authorities are keeping fairly quiet about this as Central Banks are quietly going about the business of accumulating more gold into their coffers in anticipation of the new rules at year end and they certainly don’t want to be competing with all and sundry (for example you and me) during this process as they want to keep competition, and therefore price, down to a minimum.
For all we know this could well be the first move to return to some sort of Gold standard, something that we are constantly told would be impractical and will not happen. You can rest assured that if such a development was ever enacted the general public would receive no prior warning of it.
Is this new rule likely to lend itself to a significantly higher Gold Price- well it is not very likely to cause the opposite effect now is it.Jan
USD/JPY and JPY crosses - is this the retirement trade?
All
The USD/JPY has attained the state that I refer to as ‘trending’. Price pushing up hard and fast against spaying Bollinger Bands . The ‘morning star’ rejection of lower levels that I documented on the 10th of November has been a wonderful indicator.
From observing this technical state in the past I’ve noted that ‘pullbacks against the trend can be quite sharp but they are usually brief by time’ (24/48 hours).
This pair, in my opinion has been incredibly depressed for a number of years, and it could really fly going forward. Why not 100+?
For a bit of perspective (and showing my age) this pair was at 250.00 when I started in FX and had been at 360.00 in the late 1960’s.
USDJPY – click here to view chart
What about Gold (the store of value as central banks globally attempt to inflate their way out of trouble) versus the JPY? Check the 1 year consolidation break out!
XAUJPY – click here to view chart
And NZD/JPY ? The Christchurch rebuild will make NZ’s economics look unlike any other western economy and on the other side of the ledger Japan’s problems (which I’ve documented many times recently) undermines the JPY. 100 on this cross anyone?……………………….and you get paid to hold it!
NZDJPY – click here to view chart
A trade weighted type portfolio of each of these pairs may be vastly rewarding going forward.
G.
Apple Inc - Far enough for now?
Hi
Apple Inc. shares have fallen 28% since September (20% since Steve Jobs death) in a rather brutal sell off. As long time writer Dennis Gartman is want to say “Apple was one of the ‘Generals’ leading the equity market troops to the topside in days gone by and has been the ‘general’ leading the way south. Can Apple now lead markets higher again in the near term?
Fridays price action is highly suggestive of very strong buying interest in the US$505/525 area. Perhaps the killer sell off has gone far enough for now ?
AAPL – Click here to view chart
Cheers G.
NZD/USD - No one's talking about it!
All
I’m amazed that there is so little chatter around the potential for a really stiff NZD/USD fall. Has the recent lack of relative volatility lulled the market into complacency?
Sharply falling global share markets, rotten local employment and retail sales data and our closest (and biggest) trading neighbour is in the midst of an interest rate cutting cycle and I’m not seeing terribly much interest to sell. Nor am I seeing much chatter on the wires regarding the possibility of a big fall. AMAZING!
Here’s an overlay chart of NZD/USD (in yellow) and the Dow Jones Index (in black). Since the GFC the two instruments have been highly correlated but look at the magnitude of the Dow fall comparative to that of the NZD in recent weeks.
The NZD/USD has been viewed by most as being somewhat overvalued for quite some time now, certainly departing RBNZ Governor Bollard fired a parting shot at the U.S. and the FED’s policies which keep the USD depressed (and as a result overvalue the likes of the NZD). I’m hearing the farmers have their cheque books firmly closed at present which doesn’t help. Is the Q3 in NZ just a soft blip or something more, is the USD ready to roar……..no one knows of course but the sum of what we do know right now suggests the kiwi may have quite a bit further to fall.
NZDUSD – click here to view chart
G.
Interesting Snippet on US Oil Production
All
I have been a fan of shorting U.S oil on just this theme of increased U.S production (refer ‘Time to sell Crude Oil?’ dated 29 Aug. Crude then US$96 – now US$85).
A somewhat less risky trade to capture this theme could be a ‘pairs’ trade selling U.S Crude buying Brent as the supply expectations widen.
G.
US is top dog in oil
Many of us can (vaguely) remember the oil crises of the mid-70s when the Middle East countries held the world to ransom over oil supply, causing petrol prices to skyrocket.
An everyday item that we all took for granted suddenly became an expensive luxury, particularly if your Dad drove a big Holden V8 gas guzzler to cart the kids around.
Now the worm has turned.
For so long, Saudi Arabia has been the world’s largest single country producer and together with all its OPEC mates has kept the western world on tenterhooks for the best part of three decades or more.
U.S. Energy Production – click here to view chart
But now with the shale gas revolution in the US (and elsewhere around the non-OPEC world), the International Energy Agency (IEA) thinks that the US will become a net oil exporter by 2030 and almost self-sufficient in oil by 2035. The US currently imports around 20% of its oil requirements and is by far the biggest consumer of petroleum products.
The IEA’s latest annual review of world energy supply says the US will overtake Russia as the biggest gas producer by 2015 and become the world’s largest oil producer by 2017.
U.S. Fossil Fuel Production – click here to view chart
The combination of producing its own energy and more frugal consumption through technology, education and basic economics will also dramatically shift the geopolitical balance of power around the world.
In short, the US may not have to be so friendly to the Saudis or anyone else in the Middle East any more.
The shale gas bonanza also has the fortuitous side effect of replacing coal as the main energy fuel stock in the US which would also go a long way to mitigating many greenhouse gas concerns.
This story has a very long way to play out, but has already become a major global issue.
NZD/AUD - Sunk by back-to-back poor NZ data
All
I have been a fan of NZ’s prospects over that of Australia in recent times given the Canterbury rebuild and a number of droughts around the world keeping NZ’s soft commodity prices elevated compared to that of Australia’s hard commodities. The strategy has given a couple of nice runs higher to trade on the NZD/AUD cross but recent data has abruptly turned that around.
Today’s very weak Retail Sales data, coming hot on the heels of the shocking 13 year high in NZ Unemployment, may see built up long NZD/AUD positions liquidated in coming sessions.
My modelling analysis worked very well today capping the recent bounce in the cross at 0.7860 versus the model sitting at 0.7870/92. The model is splayed wide which is suggestive of a strong move underway and the readings are dropping very quickly. That means selling NZD/AUD around here may have its risk mitigated very quickly, say within 2/3 days.
NZDAUD – click here to view chart
The daily chart is suggestive of a forthcoming test of one year support at 0.7745. A break of that level could get very ugly indeed.
NZDAUD – click here to view chart two
No one expects that the RBNZ will need to cut because they think the boost from Canterbury will be ‘real’ in the RBNZ’s own words but if the world sinks a little again, we get another decent jolt delaying the rebuild.
Cheers G.
Stunning Gold Chart - Gold on the Cusp of a Strong Rally?
All
For a very long time Gold has been considered a commodity, however since the GFC and the massive money printing conducted by the world’s central banks, the modern view is to consider Gold as money i.e. that classic store of value when everything around it is being debased. To whit Gold has been rising steadily as Copper (the Dr with the PHD in Industrial Activity) has been declining just as steadily.
Given that Gold was one of the main beneficiaries of the first few rounds of QE and the world’s central banks have again, over the last few months, embarked on another easing frenzy one could expect that Gold will begin to rise again.
In that context this long term chart of Gold, as measured against its 55 week moving average, makes for very interesting reading.
Since the 2001 low of US$255.00 oz the 55 week moving average has done a simply amazing job of defining the major trend. Now the recent sharp drop to US$1.672 oz very much looks like the low made in April 2009 before Gold embarked on a massive 122% rise. (This was the same period that my Mr Silverballs rode NZ$1,500 to NZ$1,000,000 in Silver using the leveraging capabilities of the BBY Online system).
Further hardening my resolve that Gold may be on the cusp of another strong rise after a 13 month consolidation, the weekly bounce off the 55 week m.a. was a ‘bullish engulfing week’.
Chart 1 – The 55 week m.a. documented.
55 m.a. – Click here to view chart
Chart 2 – A closer look at the recent bounce.
A closer look – Click here to view chart
I think that this could be one of those very rare occasions where an truly stunning opportunity exists. I have multiple ideas on how to capture any ensuing move should you be interested.
Cheers G.
Update - the Graveyard - USD/JPY
All
This trade is progressing slowly but surely. To recap, the bones of this trade are;
# The 30 year run of trade surpluses has now turned to deficits as the Japanese turned off their nuclear power stations after the Tsunami inspired Fukushima disaster. As a result the Japanese now import the vast majority of their energy requirements.
# Japan’s demographics are poor with the population forecast to decline to 90 mio by 2055 from the 127 mio peak in 2004. Those citizens that are left will be much older too.
# The Bank of Japan has set forth on a new round of monetary policy easing. Top Japanese research house Nomura have been widely quoted recently regarding the new policy saying that the “JPY is likely to weaken due to the BoJ becoming more proactive as a result of likely changes in government leadership as well as changes at the Japanese central bank in coming months.
# …and the budding theme that we here at Edge Capital are watching with great interest is the vast supplies of cheap energy (shale gas) that the U.S is currently harnessing. We think this could be a major kicker for the U.S in coming years. Cheap currency and super low interest rates have been prevailing for 5 years now, add super lean business organisations and top it off with cheap energy. That should be one tasty cake when baked.
USDJPY – click here to view chart
P.S. Got to love NZD/JPY on this basis too !
Cheers G.
Physical Gold - the major new trend
Much has been written about Gold’s dramatic rise in price over the past decade or so and it certainly appears that this trend is set to continue for some time yet.
However within this trend of increasing demand for Gold a new trend, and probably the most important development yet, is starting to take hold and this is the demand for investors to hold actual physical gold.
The significance of this development is that in the early part of Gold’s rising trend the market was to a very large degree driven by the paper market with the introduction of Exchange Traded Funds which tracked and were backed by gold. Investors flocked to these funds and as a result more and more of these types of funds were brought to the market. Such has been the proliferation of these funds that many in the market are starting to wonder if indeed these funds actually hold the amount of gold they profess to hold. There may not be anything in this concern and perhaps these funds do indeed have the amount of gold they say they do but the very idea of being ‘pooled’ with other investors is certainly losing its attractiveness.
According to the World Gold Council purchases of gold bars and coins have increased nearly 100% since 2009, whereas additions to Exchange Traded Funds are down by nearly three quarters in the same time period.
Investors are becoming increasingly concerned about developments in the financial markets and they know that throughout history gold has been a safe haven for their wealth, the more the value of paper currencies are eroded by such things as QE the more valuable their Gold becomes. Now accompanying this increasing fear is the increasing desire to hold their gold in a secure vault in their own name or for some burying it under the floorboards at home is the way to go (not something I would particularly recommend but everyone to their own).
The matter of secure vaulting has also been much highlighted recently as many holders of physical gold have their gold stored in Bank vaults and Banks are notorious for leasing out the gold that they have in their vaults. There have been many cases recently of significant gold investors requesting delivery of their gold, that is supposedly being held in a Bank’s vault, only to be presented with delay tactics from the Bank while the Bank struggles to obtain the Gold to deliver back to its client.
In recognition of this increasing trend in the desire to actually own physical gold in your own name and in a secure commercial Non- Bank vault (no leasing to worry about or pooling of ownership) we at Edge Capital Markets have obtained access for our clients to a Gold purchasing service that was previously only available to wholesale clients, with the accompanying very attractive precious metal prices, of course actual delivery of the metals is available for those who want to provide their own storage at home (spade and extra floorboards not included).
