The positive price action in gold of the last few weeks stands out in sharp contrast to other sectors of the funding market, particularly repo. Under last year’s defiling paradigm, such a collateral shortage as pronounced as what we see now would have been disastrous for gold prices (more collateral demand typically leads to an increase in gold “leasing”, which [...]
The explanation given for the increase in participation at the reverse repo “window” in mid-April was taxes. In other words, the payment of quarterly and annual estimates and billings reduced the need for the federal government to borrow. Since the variability in borrowing amounts is taken up in t-bills, the relative scarcity of on-the-run t-bills has left the market somewhat [...]
Apparently the stasis that has infected credit markets has been visited upon gold prices. Going back to late March, gold has straddled the $1,300 level without straying too far on either side. As with other credit market prices, such stability is conspicuously different from what would be considered “normal” market behavior. Is it possible the two opposing forces affecting gold [...]
The latest money growth figures from China seemed to have brought back worries over more disorder in finance. Tomorrow the Chinese government will release GDP figures for the first quarter and current expectations (I know) are for 7.3% Y/Y growth. That would be the slowest rate of expansion in memory. The two are inextricably linked as slowing growth, including the [...]
There are certain compounds that just do not go together without creating volatile reactions. These binary substances, when mixed, are exceedingly dangerous under even stable conditions. It seems as if there is a lot to be said of the latest near miss in Chinese bond defaults. Again, we are dealing with a relatively tiny business that should, on its own, [...]
Analyzing anything of and around China is difficult to begin with, so any misconceptions that form are understandable. That being said, there are certain methodologies to global finance that penetrate even these potential bends in conventional wisdom. I think that applies to recent commentary on the Chinese financial system as it relates to currency changes. After appreciating steadily since revaluation [...]
Gold has seen a healthy run since the first incidence of QE taper, again conforming to the idea that gold is tail risk insurance unrelated to inflation perceptions. That included a January rebuke to the collateral pressure/selloff pattern that we saw too much of in 2013. In the past few days, gold prices have come down a bit and that [...]
The core of 2014 Chinese defaults is really about control, as it ever is in 21st century finance. Central banks believe they have it and can exercise it with precision, a mysticism that is accepted widely by market participants. In allowing smaller firms to default, they are sending the signal that they want greater order in what is near-universally recognized [...]
So far in China this year there have been defaults and “bailouts” in the credit markets, but they are tiny in relative comparison to everything else. That they have occurred at all is why they have grabbed so much attention. We all have some inkling of the credit and monetary inequities that are roiling inside the Chinese economic gut, but [...]
Following up on the global trade warning out of Australia, commodity prices are acting as another corroborating piece of the global slowdown. Typically, copper acts as a decent barometer of global manufacturing activity, earning the nickname Dr. Copper. Copper prices have slumped recently, moving back to the lows of mid-2011 (just before the European re-recession emerged). What is more amazing, [...]
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