It’s well and truly Trump 2.0 and we’ve had another very interesting start to the year. The Aussie dollar is back above 70cps against the greenback and a likely interest rate hike next week is set to boost it further; gold and silver continue to go absolutely gangbusters (due largely in the first case at least to a falling USD),and we’re getting a rate hike because Aussie inflation is back to nearly 4%(!).
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The US has also reiterated its threats to attack Iran, because why not, although now it looks like Washington’s attention on Greenland has waned.
We’ve also seen a huge spanner in the works when it comes to the critical minerals thematic because of a Reuters report this week that said Washington is considering walking back its price supports for rare earths miners.
Since then, we’ve had one White House talking held tell the press the US will now turn to allies to support rare earths prices, which to me feels similar to Trump’s insistence that other allied countries must spent like-for-like amounts on defence.
Another week, more bullshit.
(The Department of Energy also claimed the Reuters report was inaccurate, but I’m going to put my trust with Reuters on this one.)
Is silver a meme trade?
Earlier this week, I wrote a piece on whether or not silver is a meme trade.
That might seem like a bold call when there’s an everything rally (or is it a commodity supercycle?) underfoot, and it’s worth noting that on Friday afternoon AUS time, all major metals pulled back a little – but I don’t expect that to be a long-term trend.
(Here’s to hoping I don’t need to sheepishly point out a majorly bad prediction this time next week.)
Here’s an excerpt from that silver article:
Get this: The world’s most popular major silver ETF right now, the U.S.-based iShares Silver Trust, has seen some ~US$35 billion worth of trades (on a “notional basis,” according to BTIG analyst Jonathan Krinsky).
That’s obviously a big number, but it’s also around the same amount of Monday turnover that the SPDR S&P 500 ‘SPY’ ETF saw; a Wall Street index fund.
Me – I wrote this.
Long story short, that’s a lot of love for silver. Even ASX-listed Kogan has been selling 10oz bars, and you can even use Afterpay! Somehow, I don’t think this is a sell signal, even though in a normal world it probably should be.
Stuff America: let’s turn to home
But the biggest news of the week at home – and I should have probably led with this, because we live in Australia, not America, but I can’t be bothered re-ordering all my paragraphs, as I am already at the pub – inflation’s back to 3.8%.
That’s headline inflation (or CPI), not core inflation (or ‘Trimmed Mean’), which is lower at 3.3% – in the latter case, we’re seeing a cooler inflation story, but seeing as electricity prices are what’s pushing inflation back to nearly 4%, I don’t think core matters much in this case.
So core inflation suggests that inflation is sticky but only just outside the target band, depending on how you define just. But that’s not really the whole story – because electricity prices aren’t likely to magically get cheaper anytime soon.
So in this case, the headline read of 3.8% – which is nearly 4%! – probably means the RBA needs to introduce a rate hike, and because government power bill rebates falling off have led to an increase in inflation, the question must be asked: why did we cut 3 times last year?
Because there’s another way of looking at that story: if the removal of rebates has pushed inflation up, that means that the rebates were artificially pushing inflation down.
So then why did the RBA cut? If any Canberra-side journalists are reading, ask Jim Chalmers that. He’ll get unhappy about it, but it’s a good question.
Until next week!
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