Housekeeping: Good Morning.
“The reset is a process, not an event.”
Today
Discussion: $3,400 Gold and The Widening Gyre
Discussion 2: Howard Marks Asks Why?
Analysis: Gold’s Widening Gyre
Turning and turning in the widening gyre The falcon cannot hear the falconer; Things fall apart; the centre cannot hold; Mere anarchy is loosed upon the world, The blood-dimmed tide is loosed, and everywhere The ceremony of innocence is drowned; The best lack all conviction, while the worst Are full of passionate intensity. -Yeats "The Second Coming"
Problems at Home:
The dollar’s downward spiral accelerated over the Easter weekend, culminating in a sharp collapse during early Asian trading. With many regional markets closed and liquidity thin, the Dollar Index dropped to a fresh three-year low.
The proximate cause? A surge in speculation that Federal Reserve Chairman Jerome Powell may be removed from his post. The trigger was a Friday remark by National Economic Council Director Kevin Hassett, who confirmed that President Trump is “still exploring” the option of firing Powell….
Gold, unsurprisingly, led the charge among hard assets. Prices ripped through the $3,360 level, pushing into uncharted territory just shy of $3400. But what about Powell?
Powell may resist easing financial conditions. But if he won’t cut rates, Trump appears ready to apply pressure through other channels. Dollar devaluation becomes the workaround.
Solutions Cause Chain Reactions:
The larger implication lies in what other central banks will do next. As the dollar weakens, the euro and yen are strengthening uncontrollably—damaging exports and crushing already fragile economies. If the ECB and BOJ are forced to respond by slashing rates or restarting asset purchases, we could witness the next leg in the global race to the bottom for fiat currency.
Once those central banks respond, the path is clear: coordinated or uncoordinated, we enter the next phase of monetary debasement.
Gold is reacting not just to the trade war now, but to the trade war solution.. a global race to the bottom.. or a widening spiral downward for fiat, and a widening spiral upward for hard assets like gold and silver
Bottom Line for GoldFix:
Markets stop panicking when policy makers start panicking. And policy makers are not panicking yet. That will happen if Trump’s approval ratings drop like the stock market is currently doing. The gyre must widens for both Gold and the USD, but in opposite directions now.
Howard Marks Asks Why?
In a letter to investors Howard Marks wrote: Why are we even in this position now?
To date, the world’s high opinion of the U.S. economy, rule of law, and fiscal solidity has allowed us to hold a “golden credit card,” where there’s no credit limit and no bill ever comes. This enabled the U.S. to run fiscal deficits in each of the last 25 years and all but four of the last 45, including trillion-dollar-plus deficits in each of the last five years. In other words, we’ve been able to live beyond our means, with the federal government spending more than it takes in via taxes and fees. This has led to one of the worst things about the U.S.: the $36 trillion national debt and the grossly irresponsible behavior in Washington that caused it.Since I don’t expect Washington to suddenly begin to behave responsibly and live with balanced budgets, I’m left to wonder how much longer we can count on that golden credit card.
Howard Marks Fund Letter at bottom…
Featured:
Markets Recap:
The S&P 500 ended higher as investors weighed progress in U.S. trade negotiations with Japan and the EU. Treasury yields ticked higher amid market calm. Gold prices slipped on profit-booking, while the dollar was little changed. Oil climbed on trade deal optimism and fresh Iran sanctions.
Energy stocks led Canada's main stock index higher, as investors took stock of U.S.-Japan trade negotiations, although sentiment remained fragile amid tariff uncertainties. Toronto Stock Exchange's S&P/TSX Composite Index ended 0.36% higher at 24,192.81.
Pope Francis died Monday
Klaus Schwab has been fired
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Full stories and more in premium…
Data on Deck:
MONDAY, APRIL 21 10:00 am U.S. leading economic indicators March -0.3%
TUESDAY, APRIL 22 9:30 am Philadelphia Fed President Harker speaks
WEDNESDAY, APRIL 23 S&P flash U.S. services PMI
THURSDAY, APRIL 24 Core durable orders (business investment) March
FRIDAY, APRIL 25 10:00 am Consumer sentiment (final) April 50.81
Summary and Final Market Check…
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