Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Iron Lady of Europe Quits. Will Gold Replace Her?

Commodities / Gold and Silver 2018 Nov 02, 2018 - 03:51 PM GMT

By: Arkadiusz_Sieron

Commodities

On Thursday, Mr. Draghi held a press conference. But the real thunderbolt hit on Monday, when Ms. Merkel announced that she would step down this year as a leader of her conservative party. Will that lighting make gold shine?

Draghi Says That We Shouldn’t Worry

Let’s start with the latest ECB’s monetary policy statement and the following Draghi’s press conference. In short, the ECB kept its monetary policy unchanged, which means that the European quantitative easing will end in December 2018. Given a somewhat weaker economic momentum in the euro area and the turmoil in Italy, the lack of any changes might seem to be rather hawkish. However, the expansion of the euro area economy continues, while inflation pressure is gradually rising. According to Draghi, we should not worry about the weaker momentum, as “it’s simply that we're having growth returning to potential after 2017, where it was clearly above potential.”


The Q&A part was understandably dominated by inquiries about the situation in Italy and its potential impact on the ECB’s actions. Draghi noted that there were some spillovers to other countries, but they were limited. Although he expressed confidence that an agreement between the Italian government and the European Commission would be found, Draghi acknowledged the sovereign-bank doom loop:

But certainly these bonds are in the banks' portfolios. If they lose value, they are denting into the capital position of the banks; that's obvious, so that’s what it is.As I said, I'm still – I shouldn't say optimistic – but I'm still confident an agreement will be found. But basically, yes, you have a dent in capital position. Then of course you have weakening funding conditions as well and all this is going to translate into different lending terms.

To be sure, the balance sheets of Italian banks have improved since the Great Recession, but they used much of the injected capital to buy more sovereign debt. Italy’s financial institutions hold the highest share of state obligations in the euro area, which is now one of the greatest downside risks in the global markets.

Merkel Steps Down. Will Gold Replace Her?

Let’s move from Italy to Germany, as a great leadership transition is approaching in the biggest EU’s economy. Yesterday, Ms. Merkel, after 13 years as a chancellor, announced that she will not not stand again as a candidate to head the Christian Democratic Union and a candidate for another term as a chancellor. Her decision followed historically weak results in state elections in Bavaria and Hesse. It might be seen as a consequence of the European migrant crisis which lowered the support for Merkel.

Now, the question is who will replace the Iron Lady of Europe. The analysts speculate about the following names as possible successors to lead the CDU: Annegret Kramp-Karrenbauer, Friedrich Merz, Jens Spahn, and Armin Laschet. We like the first candidate, as her name is tricky even for Germans, and she is also called “mini-Merkel”, isn’t that cute?

But let’s be serious. What about gold? Is she a good candidate for a chancellor (of investments)? Remember that Caligula loved his horse, Incitatus, so much that he planned to make him a consul. In the long run, gold should outshine all other candidates. But yesterday it declined, as one can see in the chart below.

Chart 1: Gold prices from October 28 to October 30, 2018.


The reason was that the US dollar appreciated versus euro on the news that Merkel would not seek re-election as head of her CDU party and the German government. The market reaction is understandable, as she was considered to be a stabilizing force for Germany and the euro zone throughout the last decade. Sure, she is still a Chancellor and will lead the country until 2021. And she could then move on up to Brussels for some key position. But markets sent a clear signal, the end of Merkel’s era will not help the euro, which struggled even with her. Unfortunately for the gold bulls, it implies that the greenback may strengthen even more, exerting downward pressure on the yellow metal. To shine, gold has to replace the US dollar. But investors are not yet ready to abandon the greenback. But who knows: maybe the US mid-term elections will change something? Stay tuned!

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in