US Rate cuts, a Weaker US Dollar and Gold’s New All Time High.

As CPI data rolls in, it’s now all but certain that the FED will begin monetary easing this month. CPI year on year landed at 2.5%, well within the FED’s margin for rate cuts. We could well see Australia also lower rates, either this month or prior to Christmas. With much negative sentiment in retail, businesses will be crossing their fingers that rates are reduced to alleviate some of the mortgage and debt stress facing their customers.

In previous cycles where the FED has cut rates, we’ve seen a clear decline in value for the US dollar. During these periods we’ve seen massive growth for the Australian dollar - even achieving parity with the USD in 2010. This intense period of monetary easing ultimately brought rates in the US to zero. We could well see a similar story unfold again, as the US and other countries fight to keep their currencies lowly valued to encourage stronger exports. This ultimately affects Australia’s ability to sell resources to other countries; and our RBA will be watching the AUD and USD very closely over the coming months.

Gold hit a new all time high in the last 24 hours, currently sitting at $US2557. This comes on the back of CPI data, rates and presidential election news. 

Enjoy today’s charts.

Gold daily chart, with 200MDA

Silver daily chart, with 200MDA

US500, with 200MDA

ASX200, with 200MDA