LTG GoldRock FX Market Report- Andrew Barnett
Since the 15th December it has risen close to 10 cents and some traders are saying it has the high at 1.10c in its sights. Here is why I believe getting too bullish had danger signs written all over it.
- Four years on since the GFC and we've seen the injection of Billions and Billions into the world economy. The result is that most developed countries, other than Australia, are now financially broke and in a worse state than the deepest time in the GFC. The US will owe $16 Trillion by the end of 2012, and racking up $1 Million of debt every 27 seconds. Its interest rates are at next to 0 and the Federal Reserve, other than printing more money and keeping interest rates at 0, is out of options. Europe is arguably significantly worse, most of Europe is in a recession that is deepening and it will be decades and decades until we see European surpluses again. The UK whilst showing the odd glimpse of a decent manufacturing number is in trouble and the Bank of England along with the US will likely have to release another round of stimulus to try and kick start the economy. China is ever so slowly slowing and whilst not falling off a cliff, it is slowing not growing at the record pace is was between 2009 - 2011. All this and the stock market in January is breaking record levels.
- Unlike 2009 - 2011 when interest rates were being raised, interest rates are now being lowered. Australia had rate cuts in November and December and is likely to get more shortly. The European Central Bank is also likely to cut rates again and Japan and the USA really can't cut them any lower. All this and the stock market in January is breaking new records and dragging up the Aussie dollar.
- In 2009 - 2011 commodity prices were rising and hit record levels never seen before. Commodity prices are also again on the rise in January. World growth is now slowing, the IMF and leading authorities are lowering growth outlooks, India and China are lowering their growth outlooks but yet commodity prices have been rising and are still sitting close to historical highs. With world growth slowing, interest rates going down, governments in financial crisis the stock market in January is breaking new records and dragging up the Aussie dollar.
The world financially is in a significantly worse place than it was 12 months ago. The world’s financial bazooka is empty. An over bullish attitude is dangerous in my view as the fundamentals simply don't support it. Yes, you could argue that "who cares it's going higher anyway," but the "truth in fundamentals" always comes home to roost.
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