Gold traders 360-degree playbook

Today is a new day though and we’re seeing sellers of risk emerge here in Asia, with S&P 500 futures -1.5%, with Asian equities lower (the ASX 200 -1.3%) and traders are back buying bonds, so the USD is offered. Given these moves, gold (USD) is finding buyers again – as goes the S&P 500, as too goes gold.

We should consider the large range of measures which have disclosed in the past 24 hours, both on a fiscal and monetary level and if equities are going to rally, then it had to do so given the capacity of this news. As I say, the moves have been short lived but we need to adjust our expectations of movement – 1.5% is the new 0.3%.

Measures that have been proposed:

• Trump speaking to Republicans about taking the payrolls tax to 0% for 12 months, but it would only kick in after the November elections – a massive politicising of the virus – seems very optimistic given how stimulatory it would be
• Italy are discussing a E16b stimulus / E25B to counter the virus – PM Conte calls on ECB to do “whatever it takes” to offset the fallout from the virus
• ECB president Christine Lagarde ordered a ‘rapid fiscal response’ from EU govts – the market expects a 10bp cut from the ECB, as well as a range of other measures.
• In Australia, talk is we should hear a $10b fiscal plan from Scott Morrison shortly
• Indonesia govt suggesting that they are working on more stimulus
• The Abe government talking about a second fiscal stimulus (in Japan) of Y430.8b
• RBNZ Orr putting all policy on the table – rate cuts, FX intervention, QE – he just doesn’t think NZ needs it
• Bank of Korea indicated they would intervene in FX markets if needed – also interesting that the daily rate of new infections in Korea dropped to the lowest level in 11 days
• BCB (Brazil CB) announced they were offering 20k FX swap contracts at auction
• Mexico CB increased intervention levels from 20b to 30b

I’ll touch base on the ECB meeting tomorrow and how EU assets may trade given expectations.