This is why the price of gold is surging even higher, plus higher inflation is coming, China/US war of words and commodities.
China/US War Of Words Heating Up
June 23 (King World News) – Peter Boockvar: Tariff fan Peter Navarro put the S&P futures on quite the wild ride last night with his comments at around 7pm est that the China deal was dead only to have Trump in a tweet to walk it back about 3 hours later, “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!” The Chinese wasted no time in calling Navarro “habitual liar” and “He has a habit of talking out of his hat. There is no credibility to what he said.” I’ll say this, regardless of what one feels about China, in all aspects, and the economic relationships with the US, having the two biggest economies going at it constantly is not a good thing for global business activity…
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Higher Inflation Is Coming
Before I talk about the PMI’s reported today, I want to mention inflation for a second here. I repeat my belief that either later this year or in 2021, higher inflation is coming our way as demand comes back at the same time supply chains have been majorly disrupted. Of course add in all the monetary and fiscal easing as well and the general higher cost of doing business in this post Covid world. Yesterday, the 10 yr inflation breakeven jumped 4 bps to 1.33% and is now at the highest level since early March.
10-Year Inflation Breakeven Highest Since March
This also means REAL yields are also falling and it’s why gold is getting close to $1800.
Gold Surges, Closing In On $1,800 Level
As Real Yields Tumble To -0.634%
Commodities On The Move
The CRB index will open today at the highest level since mid March.
CRB (Commodities) Index Highest Level Since March
June manufacturing services data is beginning to roll out of Markit and we are creeping closer, in terms of time, to the news really mattering as more things reopen around the world. Australia’s manufacturing and services composite index almost doubled m/o/m to 52.6 from 28.1 with services back above 50 and manufacturing just shy of it at 49.8. An impressive rebound driven by not just a low patient count in Australia and its economic reopening but also helped by the reopening in China, their largest trading partner. The Aussie $ is higher, just below .70 vs the dollar and yields jumped too on the number. I like the Aussie$, especially if I’m right about inflation.
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