Recent developments in asset markets means gold ownership rules will change in 2017
SYDNEY, AUSTRALIA / ACCESSWIRE / December 16, 2016 / Vaulting gold in Sydney is a compelling choice driven by multiple political and asset price uncertainties, with an offshore vaulting solution provided via Custodian Vaults, the sister company to ABC Bullion.
Recent changes in asset markets have been profound, with signs of an inflexion point in the US bond market's three decade long rally, and new highs in the US Dollar index. Gold is now US$170 lower than the November highs, confounding pundits who voiced the opinion that gold could only ratchet higher. In fact, gold dropped by almost US$90 the day after the US election, underscoring what real uncertainty can look like.
Looking forward, there are many, many different changes that lie ahead or are already underway.
The possibility that the US will use a huge debt-funded fiscal boost to rebuild American infrastructure has electrified the bond market, with 10 year government debt yielding a third of a per cent more at the end of the election week, with yields almost half a per cent higher by Monday. Although there are reasons to suspect yields may calm down after the initial shock, as goes America, so goes the world. And the world is awash with debt, with substantial stocks of US dollar denominated debt held by foreign borrowers, whose repayments are now much higher as a consequence both of higher US yields and a strengthening dollar, which rallied to over 100 on the Dollar Index this week. By mid-2015, emerging nations such as Indonesia reported that they borrowed 52 per cent of their corporate debt in US dollars: Mexico has borrowed 66 per cent, Russia 29 per cent. All will feel the strain of the shift in bond yields new scenario now playing out.
The Federal Reserve and the Bank of England have had their independence questioned in the last few weeks. Be wary when politicians choose to bend both monetary and fiscal policy to their own ends, as the path of politicised monetary policy is beset by inflation.
In the Middle East, Russia has launched an offensive in Syria, quite possibly emboldened by the new US de-emphasis on regime change. This has the potential to split the US-EU stance over Syria, and the President-Elect's views on President Putin have implications for the Ukraine and the Baltic states.
Italy is in the grip of a Eurosceptic movement, experiencing substantial capital outflows as evidenced by Target2 balances with the European Central Bank, a slow-motion domestic banking crisis, horrendous unemployment and stagnant growth – how tempting a break with the Eurozone must look…it would be a dislocation with Europe's post war order that could make Brexit look trivial.