This has become a week of extremes. We moved above $1000 per oz for gold. The oil market has moved firmly above $100 per barrel and ended above $110. The yen has moved below 100 with continued appreciation. The global markets are moving with a strange level of momentum.
There is an almost unprecedented desire to hold gold which has moved from $700 to $1000 in about one year. Gold may be an inflation hedge but the inflation is only at 4 percent for the CPI. There are strong flow effects caused by so much inflation worry.
Oil has moved higher even with a US slowdown expected. Where is the recession price concession? This is not following the economic relationships of the past.
The yen has further appreciated with moving flowing back to Japan. The home bias is strong when there is a large increase in risk aversion. The carry trade of borrowing short and lending to weaker currencies may be a thing of the past.
There is an almost unprecedented desire to hold gold which has moved from $700 to $1000 in about one year. Gold may be an inflation hedge but the inflation is only at 4 percent for the CPI. There are strong flow effects caused by so much inflation worry.
Oil has moved higher even with a US slowdown expected. Where is the recession price concession? This is not following the economic relationships of the past.
The yen has further appreciated with moving flowing back to Japan. The home bias is strong when there is a large increase in risk aversion. The carry trade of borrowing short and lending to weaker currencies may be a thing of the past.
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