investorpolitico

ScalaPrivateW_NEWSLETTER -July 2018

I decided for a easier way to publish my newsletters directly from my blog,

ScalaPrivateW_NEWSLETTER -June 2018

Gold has been one of the worst performing sector in July what happened?

There are several factors at play

• All the metal conglomerate is under pressure from the potential trade war spill over.
• June /July are typically weak month for gold and precious metals due to the North Hemisphere summer holidays
• US Dollar strength (now in doubt as President Trump is looking into currency manipulation – specially the Yuan dropped like a stone).
• Temporary subdued perceived geopolitical crisis ( I say subdued as satellites show an expansion of North Korea missile program structures and the new Iranian sanctions are due on 4th November).
• The market has been so good that gold, the classic counter trade, fell. Be wary, crowded trades never worked the last two years.

So – weakness, but not uncommon. Interestingly gold miners are at one of the cheapest level in respect to gold price.

A similar theory applies to all precious metal sector.

Ttade wars are ratcheting up and, at least until the November Congress election, they will keep on being with us.

I explore more in detail in my newsletter, but it is a multi_faceted issue.

1 Part show for the mid term election

2. Part real – China 2025 is a direct attack to the US supremacy

3. Overdue as China is attacking the world since 1995.

The issue is that there is no negotiation as until now everybody thought is was a fake trade war.

About the market reaction – it is both bad and good. Why also good? It is one of the few thing that can stop the Fed rising interest. Interest rate, at the end, are the only real killer of bull markets.

On the side, and not talked about, the US Congress is trying its best to take away the tariff power from the President. Not an easy task with ann election pending.

Recently the Australian market has been on a tear. Notwithstanding lower growth and weak currency.

The reason behind the sudden move is due to the end  of financial year window dressing, but also to the US/China trade wars.

The large share fund with Asia ex Japan area of investment are moving away from the war zone -so exiting the markets more China – dependent to more China independent markets (Australia has a high correlation with China, but less than Hong Kong and Singapore, for example).