Making sense of this crazy world
Markets respond positively
Well, they had! I wrote the bulk of this Commentary late Wednesday afternoon, because this Friday is a Bank Holiday and I’m now finishing the script early on Thursday. Trump’s formal speech late last night hardened his stance, and markets did an about-turn in the US and then overnight in Asia, just before the close of trading. This has negatively impacted UK and European stocks this morning. Who knows what the situation will be, come Tuesday of next week!
Attacks are continuing across the Middle East and Trump is amassing ground troops, with the threat of taking over Kharg Island, in a quest to control the Straits of Hormuz and the oil supply through this passageway.
Trump has, however, signalled that he is prepared to exit the conflict. No matter what
happens, he was always going to spin this attack on Iran as a victory, and I’m sure we’ll learn what his claims are in the coming days. Last night he hardened his rhetoric.
Unlike earlier in the week, markets did listen, but he must be careful his mixed messages aren’t interpreted badly. He can’t keep on ‘crying ‘wolf’. The oil price briefly fell below $100 a barrel, whilst stock markets surged and bond yields fell. Yet after his speech, which reiterated his social media messaging, oil rose by 5% in early trading, with all equity markets going into reverse.
In the meantime, he’s piling in with criticism of virtually every country on the globe. How to win friends and influence people, eh! He’s successfully marginalising Europe and NATO too. He’s told so-called allies to buy oil from the US or “take it themselves”.
Trump also posted on social media, saying that Iran has asked for a ceasefire “something we will consider when the Strait of Hormuz is open, free and clear”. He went on to say “until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!”
I wonder how history will judge what is unfolding before our eyes?
Meanwhile, gold has experienced an awful March casting doubts over its safe haven status, yet Goldman Sachs appear optimistic about the prospects of prices rising.
This week’s content:
- Gold rout
- What could happen now?
- Global stocks rebound after month-long sell off
- How have the markets responded over the last 5 days?
- Conclusion
Gold rout
Gold, long regarded as a safe haven for investors, has suffered its worst month in 17 years as higher energy costs dampen the outlook for US interest rate cuts.
In broad terms, currencies tend to weaken when interest rates fall, but do the opposite when interest rates rise. Gold, more often than not, benefits from a weaker US dollar but the current dynamics haven’t favoured gold. The precious metal doesn’t offer a yield, and bonds and cash can look more favourable.
Continues…
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