News

As we expected, volatility in financial markets is increasing. Many investors are in the euphoria of a possible aid package and are completely unresponsive to other macroeconomic factors.

GBP/USD

On Wednesday we saw that the US dollar began to lose ground sharply against other currencies. This is the first signal that risk assets should become more attractive in the near future.
Many thought that the deadline for accepting the aid package ended on 20 October, but it turned out that it did not. The discussion is ongoing and may continue until the elections. After all, everyone wants to be in charge in the process of giving away big money.
In the current situation, everything will depend on continuing negotiations between Pelosi and Finance Minister Stephen Mnuchin. On a relatively calm macrostatic day, we saw that the markets can react very strongly to any news and statements.
On Wednesday, the S&P500 traded almost at the opening level with a slight decline to 3425. The DAX closed 1.4% below the opening price at 12557.

Pound Sterling

Another series of negotiations on Brexit does not lead to a result. Still, there are differences of opinion, and Brussels has already started to speak out more aggressively. Time is running out and it’s getting harder and harder for countries to reach agreements. Due to the weakening dollar, the GBP/USD pair showed excellent growth to 1.3160 on Wednesday. Every day brings different news on Brexit, so the current upward trend of the pound can quickly change in the opposite direction

Bitcoin

Bitcoin shows excellent growth and gives no reason for the bears to turn around. Many believe that Bitcoin has reached a key level and will now engage in technical analysis that will show a drop to 10,000 per BTC. But as practice shows, all of this has not worked for a long time, and it is very difficult to analyse this trading asset in the current market situation.
Now we see that investors are greatly increasing their positions on BTC, the number of wallets with more than 100 Bitcoins is growing rapidly. However, it should be noted that hedge funds have bought a record number of Bitcoin contracts according to the latest SOT report, which may mean some caution about further growth.
Bitcoin soared to 12830 on Wednesday and made a new 10 week high.

What awaits us today?

08.00 UK retail sales volume for September
14.30 Number of initial applications for unemployment benefits in the USA
16.00 US secondary housing market sales in September

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The closer the US elections are, the more different forecasts analysts make. Soon there will be another round of negotiations on financial aid to the American economy.

EUR/USD

This is the last opportunity for the senate to accept the aid package. Next time it will only be possible to do so after the presidential election. Both presidential candidates do not want to approach the election as someone who, in the absence of an agreement, has deprived many Americans of their jobs.
In any case, any package of measures taken should have a positive impact on the markets. Investors now believe that support measures will still be taken, only if the Democrats win will these measures be much broader.
On Tuesday, the S&P 500 index played back a serious decline on Monday and rose 0.9% to 3455.
In Europe, the second wave of COVID-19 is increasingly making investors think about the future. Many analysts predict that the European market will never leave the neutral range before the end of the year. A large package of risks, ranging from COVID-19 to the US elections and Brexit, keeps investors from deciding which way to go. On Tuesday, the DAX traded 0.9% lower, at 12730.

Euro

The EUR/USD pair continues to trade in neutral directions. It is likely that due to the ever increasing number of different risks, the trading range may widen and the volatility may increase. On the one hand, the euro is under pressure from the growing number of COVID-19 diseases in Europe, while on the other hand, the dollar is under strong pressure from the upcoming US presidential election and the issue of a US business support package is still unresolved. On Tuesday, the EUR/USD rose by almost 0.6% and came close to resistance at 1.19.

Gold

Gold has frozen in wait and with each trading session the price range decreases. This is all because of the upcoming events, but most investors already have almost no doubt that the precious metal will grow after the US presidential election. Gold is now firmly above its key level of $1900 per ounce and showing positive growth. We also know that both presidential candidates are promising an incentive package that will force the US Federal Reserve to print dollars again which will be cheaper. In this situation, gold will win again.

What awaits us today?

08.00 UK consumer price index first year
9.30 Statement by ECB Chairman C. Lagarde
16.00 US crude oil reserves

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

20.10.2020 – Special Report. Soon they will probably make the pumps run slower again: Oil producers need higher prices because the state coffers have dried up. In addition, demand is still faltering because the global economy is still stalling due to corona. The question is whether OPEC+ should increase production in this situation. For the first time since the big oil crash in April, there were talks between Moscow and Riyadh. The reaction on the oil market should not be long in coming.

Saudis and Russians are talking again

The important meeting on funding quotas is not scheduled until the beginning of December. But the current online meeting of the Joint Ministerial Monitoring Committee of the oil cartel should already set the course for the future. Especially since, according to Blomberg, Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman have just spoken on the phone twice – since the great price war in spring, there had been an icy silence. On Saturday, both sides declared that they were prepared to cooperate closely to keep the global energy market stable. A clear warning to quota breakers in OPEC, such as the United Arab Emirates, who have barely reduced production.

Empty state coffers

Currently, the oil price is stuck at around 40 dollars, and Libya is likely to bring new oil onto the market soon. Now, of all times, when most oil exporters urgently need higher prices because government spending has risen in the wake of Corona. Many producers are living off their reserves – according to the financial blog ZeroHedge, only Russia, Qatar and Mexico can fiscally cope with the current prices. Oilprice.com pointed out that Bahrain, Dubai and Abu Dhabi have issued government bonds for the first time in years. And Saudi Arabia has also ramped up its bond issuance.

Hope for an increase in demand

Oil producers are therefore under pressure to reconsider the planned easing of production cuts. The limit was last raised by 2 million barrels per day, and in January another 1.9 million barrels are actually to be added. OPEC Secretary General Mohammad Barkindo admittedly judged last Thursday that current demand is anaemic. After all, the official had previously said that the worst was over. And in his annual World Oil Outlook, the cartel had looked positively at the end of the year.
Major players in the market also warned against increasing supply, including Mercuria Energy Group and JPMorgan Chase. Especially as there were bullish fundamental signals that should not be stifled by an increase in supply: The demand for paraffin will remain weak for years to come due to the aviation crisis. But China and India are preparing for new purchases of crude oil.

Speculators in the sights

There is another interesting aspect for oil bulls. Saudi Energy Minister Abdulaziz bin Salman had already warned the short sellers in September. There could be a change in production policy. In concrete terms, he said: “We will never leave this market unattended. I want the guys in the trading floors to be as jumpy as possible. I’m going to make sure whoever gambles on this market will be ouching like hell. ZeroHedge commented that the combined net exposure to Brent contracts is lower than it has been for a long time. This leaves a lot of room for demand and price jumps upwards. See graph above.
Our conclusion from this mixed situation: While Covid-19 is currently continuing to curb demand for oil, the important players apparently believe in a recovery of the market. And the hoped-for rising prices will require many suppliers to restructure the national budget. Moreover, Russia and Saudi Arabia now seem to be acting together – and they seem to have their eyes on the usual quota cheats. Moreover, since the Saudis are targeting the speculators – and since they apparently fear that oil prices will plunge into the negative as they did in the spring – we have a number of long factors.

But: a failure of the quota negotiations or even a new outburst of anger by the Saudis and the ramping up of the pumps as in spring could of course immediately reverse the trend. We wish you successful trades – and keep an eye on the matter for you.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

A relatively quiet week is starting in terms of macroeconomic statistics. The business reporting season continues, but the optimism of the players is already beginning to end.

Gold

The current state of the markets is overshadowed by the lack of progress in decision making on financial assistance to Americans. On Wednesday, the Senate will vote on this, but it is already clear that this decision will not be taken. There is very little time left until the US presidential election, which will take place on 3 November. The Democrats are already saying that after their victory in the election, the amount of aid will be revised.
The COVID-19 contamination in the USA is gaining momentum. Most states report a record number of cases every day. The second wave could have an even greater impact on the economy than the first. The threat of quarantine measures is increasing every day. Investors should be patient and try to keep their assets in a more secure place.

Pound Sterling

The current situation on Brexit keeps the pound in limbo. The parties are concerned about the lack of progress in negotiations. Deadline for resolution is 31 December. Until this date the GBP/USD pair may behave in different directions. Traders in the current situation cannot determine in which direction to go. The pound may grow if the negotiations continue, but a growing problem with the coronavirus may make adjustments to growth plans.

Gold

Gold continues to be the most stable refuge asset. More and more investors are giving up risk due to increasing coronavirus infection. Due to growing uncertainty, gold is becoming an excellent tool for preserving capital. Over the past few trading sessions, gold has been able to grow to a key level of $1900 per ounce. In the near future, we will be watching another gold rally in the market.

What awaits us today?

04.00 Chinese GDP since the beginning of the year
04.00 Volume of industrial production in China since the beginning of the year
14.00 Address by Mr. Powell, Head of the US Federal Reserve.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

After all, the coronavirus is beginning to win over the countries of Europe and all areas of the economy are beginning to suffer as a result. France is introducing curfews, and this is already a serious statement.

DAX

Thursday was very nervous for investors. Serious restrictions in Europe spilled over into fears for the USA, as the states had registered the maximum number of COVID-19 cases since late summer. All this adds to the fear of investors and makes them withdraw from risk assets.
Of course, many might say that the Initial Unemployment Claims Report contributed to the fall in markets on Thursday, but if you look deeper, the total number of unemployed people has fallen by more than 1 million since the last report. This is a serious indicator that points to a possible recovery in the labour market.
What is happening now is that elections in the US coincide with the second wave of COVID-19, as well as the growing conflict in Nagorno-Karabakh, which could create another hot spot on the world map.
The main indices show a certain correction, which should take on all these fears. The DAX closed on Thursday at 2.58% below the opening price, at 12692. The S&P500 index fell by more than 0.7% to 3450.

Euro

Due to the growth of coronavirus disease, the pressure on the European currency is increasing. New restrictions on movement and new social distance measures are being introduced every day. In this situation, it is clear that such changes will not do the economy any good. On Thursday, the EUR/USD falls amid growing problems in Europe and trades below 1.1700.

Oil

As soon as oil has positive growth signals, the risk of black gold prices falling immediately increases. Lockdown problems in Europe are putting increasing pressure on the market for oil products. Although it can already be seen that the level of $41 per barrel is a key resistance level in the current situation. So far, we can expect how the economy will behave during the second wave of the coronavirus. Pandemic news is being added every day, which is negatively affecting the price of petroleum products. WTI oil is traded at $40.5 per barrel.

What awaits us today?

02.00 Sale of new housing in Australia for September
11.00 EU Consumer Price Index from the beginning of the year
14.30 US retail sales volume for September

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

In the USA, the company reporting season is starting, which will show the current state of the economy. One of the most important will be the reports of major banks, as they play a fairly large role in shaping the economy.

WTI

The first reports from the banks showed that they feel good. Investors have made sure that the economy will withstand the blow, even if the government aid package is not approved. The chances of a compromise on the package are decreasing day by day, but investors are hoping for $2 trillion in aid if the Democrats win the election.
On Wednesday, the markets were traded in a mixed way. The S&P500 index at the opening showed good growth, but after a few hours it began to fall. Investors probably recorded profits on company reports.
The DAX index is trying to find support on the second day around 12960. After all, the growing number of COVID-19 cases is putting some pressure on risk assets.

Pound Sterling

No progress has been made on the substance of the EU-UK negotiations. As a result of the EU Council meeting, the preparation of a contingency plan for the failure of negotiations will be intensified. Boris Johnson said that he is ready to continue negotiations so that a certain consensus can be reached. The GBP/USD pair has already hung on the sidewalk for the fourth trading session and is waiting for at least some signal for further movement. On Wednesday the pound traded near the key level of 1.3000.

Oil

The oil market is again in the green zone. The growth factor is OPEC’s report that the oil and gas industry is recovering faster than previously forecast. So far, OPEC member countries have fully complied with previous agreements to reduce oil production. The second factor was the growth in oil imports into China, which increased by more than 2% in September. If this upward trend in oil product consumption continues, we can expect the price of WTI to rise above $45 per barrel in the near future. On Wednesday, the price per barrel is up 1.4% to $40.75.

What awaits us today?

02.30 Change in the employment rate in Australia for September
14.30 Number of initial applications for unemployment benefit in the USA
17.00 US crude oil reserves

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

It turned out that things are not that simple in the markets. As soon as the election debate was overshadowed, news from Johnson & Johnson’s about the suspension of testing for a new COVID-19 vaccine, due to an unexplained illness of a volunteer, set the tone for the stock markets to fall.

S&P500

It’s strange that because of this news, the markets are reacting so strongly, with around 300 COVID-19 vaccines being tested at the same time, but most likely J&J was one of the leaders in this race.
As history shows, it was time for the market to take a break. The explosive growth of the S&P500 index in the last four trading sessions was still waiting for a correction.
Uncertainty awaits further. Quarterly company reports begin, which will reveal the real picture of the current situation. Some will earn enough, others will suffer losses. It will be important for the US to further reduce the unemployment rate, which has a very strong impact on the overall state of the economy.
The situation seems to be stable, but many investors decide to close their risk positions and move to safe assets. On Tuesday, the S&P500 index fell by more than 0.3% to 3520, the DAX closed at 13018, which is 0.9% less than the opening level.

Gold

Precious metal is still not allowed to reach its sacred boundaries. Against the backdrop of problems with coronavirus vaccine development in the USA, gold is losing its position and is trading at $1890 on Tuesday. For some reason, on the eve of the US presidential election, investors decided to invest in the dollar. We understand that the dollar is a paper that has been printed quite a lot over the last year, so it is worth thinking about buying gold, which should still grow.

Bitcoin

This week was marked by a breakthrough of $11,000 per bitcoin. As we had previously anticipated, the narrowing of the trading range ended with a sharp upward spurt. Someone was buying the cryptocurrency very well in a short period of time, which indicates that big players are interested and that there may be big speculation. So far Bitcoin is doing well and the price is starting to approach the psychological level of $12,000 as well as this year’s highs.

What awaits us today?

09.00 Consumer price index in Spain since the beginning of the year
11.00 Volume of industrial production in the European Union for August
14.30 US producer price index for September
20.00 “Beige Book” by the US Federal Reserve.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

13.10.2020 – Special Report. What we have long been prophesying at this point is now taking shape: leading Western central banks are preparing their own digital currency. This should be the beginning of the end for Bitcoin, Ethereum and co.

The Empire strikes back

Here we go: seven central banks have defined the initial conditions for issuing their own digital currencies, as reported by Reuters. This is the conclusion of a report published on Friday by the Bank for International Settlements (BIS). The alliance brings together the Federal Reserve, the European Central Bank (ECB), the Swiss Federal Reserve, the Bank of Japan, the Bank of England, the Bank of Canada and the Swedish Riksbank. It is also joined by the BIS.

E-currency in everyday life

Central Bank Digital Currencies (CBDC) will be able to coexist with cash and other forms of money. Monetary stability should not be jeopardised. The digital currency must also promote innovation and efficiency in payment transactions. And further: consumers should be able to use digital currencies easily, and there should be very little or no costs. So far, none of the seven central banks involved has decided to introduce its own digital currency. But what is not yet the case can still happen.
The Chinese central bank, which is already testing a digital renminbi in a pilot phase, is not among them. Which in turn also poses a threat to alternative e-foreign currencies.

Away with the cash

You can already anticipate what is to come: An e-currency amounts to the abolition of cash, which eliminates undeclared work and pleases the tax authorities. Criminals will also have to dress warmly. Because when almost the entire western world introduces its own digital currency, questions will soon be asked by the authorities as to why a private investor would still want to buy Bitcoin or other cryptos. So Bitcoin buyers can only be gangsters who want to launder and hide money.

Money laundering via Bitcoin

It plays into the hands of the state power that recently Elias Strehle from the Blockchain Research Lab and Lennar Ante from the University of Hamburg warned against a money laundering trick. According to them, criminals could use “exclusive mining” to disguise illegal money as income from Bitcoin mining. According to the report, this works by someone placing transactions through a private channel and giving an individual miner or pool the exclusive right to confirm the transaction and hand out some cryptos as a reward. These are added to the block chain like a normal transaction. In other words, there would be a “disguise of capital transfers”, using alleged transaction costs to evade taxes or launder money. Simply by sending Bitcoin to an exclusive miner, bribing him and making him charge an absurdly high transaction fee.

Bypassing commercial banks

But central banks have another goal with their own CBDC: to bypass the commercial banks when inflation rises. For example, Alasdair Macleod stated on Godlmoney.com that by issuing e-currency directly to the public, central banks could directly achieve the desired inflation. We add: In fact, commercial banks tend to park cheap central bank money with themselves to consolidate their own balance sheets. This way, stimuli do not flow into the economy, but support staggering zombie banks.

Protection against credit crunch

Maclead also argued that the direct infusion of e-currency could prevent a credit crunch triggered by banks: „A successful introduction of a CBDC could eliminate the impediment of contracting bank credit which occurs at the end of every credit cycle.“ Und weiter: „The further benefit for central banks is it will increase their power as an organ of the state at the expense of commercial banks, potentially becoming more important than the state itself.“ Zwar zeigte sich der Experte skeptisch: „However, the current economic situation is deteriorating more quickly than a working CBDC can be introduced, so the whole exercise is likely to be too late to have any relevance to monetary policy in the foreseeable future.“

Risks with Bitcoin and co.

But we would partly contradict this. It is not a foregone conclusion that the economy will collapse before CBDCs are introduced. In fact, in the event of a crash, the Cryptos would have the status of a reserve currency, which would be bullish for traders. Nevertheless, there is a high probability that sooner or later central banks will end the unpopular experiment of uncontrollable digital currencies.
Perhaps it will take months, perhaps several years. While it may not be technically easy to build a government-controlled e-foreign currency, there will certainly be skirmishes over the lead in the block chain. But the central banks have time and infinite resources at their disposal. Anyone investing in Bitcoin to avoid the gutting of the intrinsic value of money by the printing press – in other words, ever new stimuli and quantitative easing – should keep this in mind. The Bernstein Bank is keeping an eye on the matter and wishes you every success!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

12.10.2020 – Special Report. The price of the yellow metal has been stuck below the $2,000 an ounce mark for a while now. But the real move is yet to come – at least if the super bulls have their way. According to this, the price of gold could soon shoot up exponentially. Because in their opinion, the monetary system is entering its final phase – we are seeing the catastrophic boom.

“The exponential phase has begun”

The initial situation is known: In the wake of the corona pandemic, governments and central banks around the world have cut interest rates and adopted new stimuli. The expansion of the money supply is leading to a devaluation of paper money. Investor Egon von Greyerz (EvG) benefits from this trend, his Matterhorn Asset Management stores tons of the precious metal deep in the Swiss Alps for solvent private investors. EvG told the blog USA Watchdog.com this: “You are looking at… the money supply, which has been going up for 50 years, but now… it’s going up in a straight line. So, we are now entering into the exponential phase of this financial system. We are seeing unlimited money printing, helicopter money like Ben Bernanke (former Fed Head) called it. Then we are going to see accelerated debasement of the currency. The real moves in gold and silver haven’t started yet.”

Hyperinflation warning

The next move will be a global phenomenon: “The bond market is going to collapse, and interest rates are going to go a lot higher…”. And further: “Inflation is going to go a lot higher, and, eventually, the currency collapses, and it is a collapsing currency that leads to hyperinflation. When the currency falls, we will see hyperinflation.” EvG added that in the past there have been individual countries with major problems such as economic collapse and hyperinflation. But the whole world has never been too keen on a problem of collective over-indebtedness. Therefore, the entire crisis would assume far greater proportions than ever before.

Gold at 20.000 – silver at 600

And then EvG’s apocalypse statement: “We are at the exponential point, and the super exponential point of money printing, deficit and of currency collapse. Gold should currently be trading at a minimum of $ 10,000 per troy ounce – and on an adjusted inflation basis it should be as high as $ 20,000. Not only gold will be in demand in this total, global collapse: silver will rise to at least $600 an ounce.

The disaster house

Shanmuganathan Nagasundaram from the blog InternationalMan.com recently took a similar view. He suspects a “crack-up boom”, which Ludwig Heinrich Edler von Mises from the Austrian School once formulated: If public opinion is convinced that the increase in the money supply will never end and that prices for goods and services will therefore continue to rise, everyone will consume as much as possible to keep cash levels low. The result would be a catastrophic boom – if inflation gets out of control and can no longer be contained, economic agents would lose confidence in the paper currency and therefore try to exchange their money for tangible assets. As a result, a lot of money flows into a limited supply of shares, which is why their prices rise very sharply – even when the fundamental outlook is poor. The catastrophic bull market heralds the final phase of a fiat money system. At the end of the boom, the bankrupt state could only implement a currency reform. According to Nagasundaram, the “crack-up boom” is no longer just a theoretical fiction. The exploding money supply in the USA is proof of this.

Heroin for the zombie economy

The dominoes are ready, InternationalMan.com said: “Bubbles are everywhere – in the housing market, cars, student loans, on the Nasdaq, junk bonds. And these ensured that the Fed would have to continue providing its “monetary heroin” to keep the zombie economy alive. All in all, gold is cheaper today at $2,000 than at $35 in 1971. Apparently, a lot of retail buyers believe such gloomy predictions. As Bank of America’s Global Commodities Research recently noted, it is mainly private buyers who are currently buying physical gold.
Our conclusion: prophets of doom are often ignored because their worst case scenario only occurs once. But this does not mean that they are wrong in the end. The Bernstein Bank keeps an eye on the matter for you and wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Factors that have affected the appetite for risk will increase pressure on markets. The COVID-19 epidemic is gaining momentum every day. Statistics on the number of people falling ill per day set a new record every day.

EUR/USD

The new rules of social distance, which are currently being introduced only in European countries, will have an impact on the economy in the near future. So far, it is difficult to imagine how difficult it will be for countries to experience the second wave of coronavirus.
So far, the markets are feeling relatively well. Election euphoria is diverting attention from other important macroeconomic indicators. Waiting for the adoption of the stimulus package warms up interest in risk assets. If the package is accepted, a huge amount of money will come to the market, which will be spent by Americans on goods and services.
The S&P500 index rose 1.1% on Friday to 3476 and almost reached the strong resistance line of 3500. If the aid package is accepted soon, we will see new historic highs.

Euro

The EUR/USD pair rose 0.56% on Friday to 1.1823, making a new two-week high. The pair seems to have closed above its key level at 1.18, which may signal continued growth. Of course, the ECB is not comfortable with this situation as the economy will recover more slowly because of the strong Euro. It should be noted that the ECB’s balance sheet increased by a record 170 billion Euro over the last week, which should put pressure on the European currency. The current situation is uncertain. There are no impulses for a particular upward or downward movement. There is a high probability that the EUR/USD pair will float in the range of 1.1750-1.1950.

Oil

Hurricane Delta may make adjustments to the operation of oil rigs in the Gulf of Mexico, which should in due course affect the price of a barrel. On Friday, the price of WTI oil fell by 1.55% to $40.8 per barrel. More importantly, this was due to a possible fixing of traders’ positions at the end of the week. A growth factor could be OPEC+’s decision not to increase oil production next year. Given the general news background, oil growth may continue with the immediate target of $43 per barrel.

What awaits us today?

8.00 Wholesale Price Index in Germany since the beginning of the year
13.00 Address by ECB Head C. Lagarde
22.00 Housing Price Index from REINZ in New Zealand for September

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