I spoke with Kitco News yesterday to discuss several major themes moving markets right now, from BRICS expansion to pre-election positioning and the broader macro backdrop for the US dollar.
We talked about how the US faces mounting challenges with debt levels exceeding $35 trillion and deficits running at nearly 7% of GDP despite strong economic growth. While the US can likely sustain higher debt levels (look at Japan), the more pressing question is whether it will choose to address these imbalances, particularly after the election. Neither presidential candidate appears poised to make deficit reduction a priority but there are still fiscal hawks in Congress.
gold weekly chart
The gold market has been particularly fascinating, hovering near record highs amid central bank buying and broader de-dollarization trends. While there’s some near-term risk of a pullback, especially around the US election if we see a smooth process, the longer-term fundamentals remain compelling. China has been a major driver, with consumers turning to gold amid property market weakness.
Internationally, we spoke about the challenge of the BRICS alliance and how it represents a treat to US dollar dominance and how Russian sanctions haven’t gone unnoticed by China and other nations seeking alternatives to dollar-based trade.
Looking at the US election, markets are pricing in potential volatility, with a consensus view that a Republican sweep could drive dollar strength through higher yields. However, a divided Congress scenario could quickly lead to gridlock pricing and potential dollar weakness.
We also talked about headlines around Chinese stimulus measures which could significantly impact emerging markets and commodities.