Just been listening to James aitken (on beyond the balance sheet podcast ) run the contrary USD arguements…i guess that is what makes markets! Hes w u on jap banks though
One of the Award-winning allocators in our panel framed it this way: the dollar's direction is ultimately a political variable dressed up as a monetary one. Your PPI-to-pivot argument is the economic scaffolding, but the core bet is that Trump moves against a strong dollar once inflation fades. Government bonds sit at 50% underweight across 72 manager reports. If the weak dollar trade returns and rate expectations soften, that positioning unwinds fast. Political triggers don't announce themselves in advance.
Thanks Russell. Reckon above $3500 gold was hot money coming in, price action was not orderly, makes sense to me that hot money leaves quick at sign of risk-off, GVZ flush. $3500 still looks like the right price to fill that thin zone.
So I got in at 2k on gold - when ETF holding were at lows. At 3500 - most of ETF additions would be underwater - so a lot of selling pressure. Against that - central banks have been buying around 200 metric tonnes a quarter. From the lows in 2024, ETFs have added 16m troy ounces = which is about 500 metric tonnes, so forced selling by ETFs could overwhelm CB buying.
I know you think Hormuz is done, but I wonder if this assessment is due to deliberately choosing to ignore it vs following it closely and assuming it's not relevant?
Simply on US inventory levels, oil should be much higher. Sure I think there is still quite a high geopolitical premium even at current prices (before the war ex China stockpiling crude would probably have been more around $40) and global inventory levels are still decently high, but there are still few tankers entering Hormuz and Iran should have an incentive to keep the strait throttled as long as it hasn't gotten out of the woods. Plus Israel is very unhappy about the current situation and even your war proxy USD.ILS has retraced half its war gains (weaker Israel Shekel since beginning of June).
(Obv if oil stabilizes here, I fully agree with your assessment, but I think oil is unresolved yet and I fear gold has one further leg down?)
The Strait of Hormuz has played out pretty much as expected. Closing it hurt Iran by hurting China and other potential "allies", and incentivised alternative supplies. Structurally it has broken OPEC.
Very possible that Israel launches strikes again - but hard to see the market getting too worked up about it - as it is no longer novel.
The bigger concern is that Kevin Warsh IS the new Volker... but my guess Trump is still in charge...
The energy consensus is interesting here: across 72 manager reports, Energy has moved to Neutral, with more than half the panel neither adding nor reducing. That is not a bearish call on oil, but it is the consensus pricing exactly the uncertainty you describe, Gordon, without yet moving to underweight. On the gold side, Commodities broadly remain overweight, but open interest collapsing to a 10-year low suggests the positioning and the conviction have already diverged. Russell's political trigger may not need a full dollar reversal to matter. It just needs the uncertainty to stop compounding.
Agree re Warsh, the scare might last only a few weeks?
Re Iran hurting China, I would disagree. By reducing oil imports thanks to large stockpiles, they managed to shield themselves (and the world) from high prices? Why do you think it hurt China? Russia benefited from higher oil prices - albeit offset by successful Ukrainian escalation that perhaps would not have happened otherwise?
Just been listening to James aitken (on beyond the balance sheet podcast ) run the contrary USD arguements…i guess that is what makes markets! Hes w u on jap banks though
Thanks for the tip off on this, I rate James, and of course seeing him roll up to that interview in shorts is hilarious and comfortingly Aussie
Music to my ears, compelling too, I think bullish for Lithium and Aussie miners on the back of that thesis
One of the Award-winning allocators in our panel framed it this way: the dollar's direction is ultimately a political variable dressed up as a monetary one. Your PPI-to-pivot argument is the economic scaffolding, but the core bet is that Trump moves against a strong dollar once inflation fades. Government bonds sit at 50% underweight across 72 manager reports. If the weak dollar trade returns and rate expectations soften, that positioning unwinds fast. Political triggers don't announce themselves in advance.
Thanks Russell. Reckon above $3500 gold was hot money coming in, price action was not orderly, makes sense to me that hot money leaves quick at sign of risk-off, GVZ flush. $3500 still looks like the right price to fill that thin zone.
So I got in at 2k on gold - when ETF holding were at lows. At 3500 - most of ETF additions would be underwater - so a lot of selling pressure. Against that - central banks have been buying around 200 metric tonnes a quarter. From the lows in 2024, ETFs have added 16m troy ounces = which is about 500 metric tonnes, so forced selling by ETFs could overwhelm CB buying.
I know you think Hormuz is done, but I wonder if this assessment is due to deliberately choosing to ignore it vs following it closely and assuming it's not relevant?
Simply on US inventory levels, oil should be much higher. Sure I think there is still quite a high geopolitical premium even at current prices (before the war ex China stockpiling crude would probably have been more around $40) and global inventory levels are still decently high, but there are still few tankers entering Hormuz and Iran should have an incentive to keep the strait throttled as long as it hasn't gotten out of the woods. Plus Israel is very unhappy about the current situation and even your war proxy USD.ILS has retraced half its war gains (weaker Israel Shekel since beginning of June).
(Obv if oil stabilizes here, I fully agree with your assessment, but I think oil is unresolved yet and I fear gold has one further leg down?)
The Strait of Hormuz has played out pretty much as expected. Closing it hurt Iran by hurting China and other potential "allies", and incentivised alternative supplies. Structurally it has broken OPEC.
Very possible that Israel launches strikes again - but hard to see the market getting too worked up about it - as it is no longer novel.
The bigger concern is that Kevin Warsh IS the new Volker... but my guess Trump is still in charge...
The energy consensus is interesting here: across 72 manager reports, Energy has moved to Neutral, with more than half the panel neither adding nor reducing. That is not a bearish call on oil, but it is the consensus pricing exactly the uncertainty you describe, Gordon, without yet moving to underweight. On the gold side, Commodities broadly remain overweight, but open interest collapsing to a 10-year low suggests the positioning and the conviction have already diverged. Russell's political trigger may not need a full dollar reversal to matter. It just needs the uncertainty to stop compounding.
Agree re Warsh, the scare might last only a few weeks?
Re Iran hurting China, I would disagree. By reducing oil imports thanks to large stockpiles, they managed to shield themselves (and the world) from high prices? Why do you think it hurt China? Russia benefited from higher oil prices - albeit offset by successful Ukrainian escalation that perhaps would not have happened otherwise?