On the heels of Western sanctions, will Russia demand payment for nat gas and oil in gold? Meanwhile investors are piling into gold and look at what is on the brink of another major upside breakout.
Investors Piling Into Gold
March 2 (King World News) – Fred Hickey: Investors really piling into gold ETFs now. 13.4 tons went into the GLD today, 23 tons added over the last 7 trading days. As I’ve shown before (in the newsletter) these are the type of inflows that drive gold higher in bull markets.
Silver Showing Strength
Graddy out of Sweden: The down volume for spot Silver today is absolutely massive. But price is not moving much. Implies strength intraday.
Russia And The Rapidly Weakening Petrodollar System
Luke Gromen: Russia will soon begin to demonstrate in very stark terms that in the Petrodollar system, it is the “Petro-” portion that is the true value, not the “-dollar” portion, via either price or shortages or both. Western interest in Russian oil and gas will likely re-ignite once the economic crash and/or possible energy shortages and gas lines begin (due to lack of Russian energy…
Will Russia Demand Payment For Nat Gas & Oil In Gold?
Alasdair Macleod: Sanctions preventing Russia spending $.€,£ etc. renders them as RCB reserves valueless. Therefore there is no point in RCB holding them. Yuan are OK because of China partnership. Otherwise, only reserve asset of any value is gold.
Russia doesn’t need $,€,£ etc. because she has high export surpluses and domestic economy is stable. Income tax is flat 13%, business regulation is light and govt debt to GDP is under 25%. There is no point in selling nat gas and oil for currency which cannot be spent.
Therefore, Russia has little option but to demand payment for nat gas and oil in gold. It would allow her to replace useless currency reserves, and to back rouble currency expansion to meet public deposit withdrawals. It has been forced on Russia by stupid Western sanctions!
Good Luck Fed
Luke Gromen: Powell doesn’t yet realize he’s going to have to buy a significant portion of the bond market in coming months, into an inflation spike.
Investors Will Find Out “It’s Never Different This Time”
Luke Gromen: Investors that have long believed that the US is the only twin deficit country in human history for which government debt doesn’t matter are about to learn “It’s never different this time.”
Otavio Costa: Copper is on the brink of a major breakout. If we go through this bullish pennant, prices will likely accelerate to the upside. Just a matter of time.
Copper On Brink Of Major Upside Breakout
Causing Price To Accelerate On Upside
Otavio Costa: Another scary correlation. Chicago PMI leads corporate margins by 6-months. It suggests company fundamentals are poised to deteriorate significantly.
Margins are likely to get squeezed by the growth in wages and salaries, rising energy prices and other supply cost increases.
CAUTION: ECONOMY TO ROLL OVER
S&P 500 Margins Set To Implode
Central Bank Moves
Peter Boockvar: The Bank of Canada hiked interest rates by 25 bps as expected to .50%. They ended QE a few months ago but will still maintain the size of their balance sheet for now. As for QT, “until such time as it becomes appropriate to allow the size of its balance sheet to decline.” I did not see any hints on that timing but it “will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving its 2% inflation target.” The same will dictate their rate decisions.
As for rates from here they were more specific, “As the economy continues to expand and inflation pressure remain elevated, the Governing Council expects interest rates will need to rise further.” The BoC is another central bank that got mugged by the inflation reality and they acknowledged that again today, “Price increases have become more pervasive, and measures of core inflation have all risen…All told, inflation is now expected to be higher in the near term than projected in January.” They did cite the invasion as part of the reason for this.
So the BoC joins the BoE of the major developed central banks in raising rates. The Fed will of course follow in a few weeks and is a reminder again the synchronized global monetary tightening that is going on. Rates are rising but they are everywhere. The 2 yr yield is up 10 bps after falling by 20 bps in the past two days.
The CAD is higher by .55% but just getting back what it lost yesterday. The Canadian dollar has been range bound over the past year, trading in a $1.20-1.30 corridor and it trades today just above the middle of that.
COMMODITY STRENGTH: Look For Much Stronger Canadian Dollar
Higher commodity prices have certainly been a help and as seen in the chart below, as the CRB commodity index has rallied over the past few years, the Canadian dollar has rallied (although as stated has been range bound over the past year).
Higher Commodity Prices (ORANGE) Will
Send Canadian Dollar Exchange Rate
Much Lower vs US Dollar (WHITE)
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