I expect a big Monday for the share price to push upwards solidly, Gold go over 1,260 USD and the AUD remaining under .80, is a big signal. I expect though the AUD to break through .80. The next test point for Gold will be $1,300 USD and obviously $1,400 USD. If Gold breaks through $1,400 then who knows where gold price will head towards.
The USD is weakening against all major currencies and as the USD weakens against other currencies the price of gold has been going upwards. If the ECB does raise rates and steadily increases rates then you would expect that capital would flow towards the euro zone and USD to further weaken against all major currencies including the AUD. If the RBA lowers rates anyway the AUD/USD won't move much anyway, so it would be ineffective anyway. Currently, there is tepid inflation and weak productivity in the US, so the US fed cannot raise rates without hurting the fragile economy and Trump as president is benign.
Australia has its own problems with the RBA been unable to raise or reduce rates due to various reasons. Increase rates then the dollar strengthens hurting the economy and low rates will heat the household debt/house prices levels which raise the ire of APRA and major credit agencies Standard and Poors/Moodys. Australia's triple AAA credit rating is on tender hooks also due to ineffective government been unable to deal in any capacity with the government deficit partly due to Malcolm Turnball, the wrecking ball Abbott bent on destroying Turnball and a toothless treasurer. So due to these reasons, you would think that the major credit agencies will lose patience and the probability of lowering Australia's credit rating would be increasing rather than decreasing.
If Australia loses its AAA credit rating due to a major credit agency/s downgrade then cost of borrowing for banks goes upwards so banks will irrespective of what the RBA does will have to increases rates and pass costs on to borrowers. This will be interesting when debt is at a all time high. Coupled with the 40% of home loans been interest only and interest only for a period of 7-10 years. Which raises the question what happens if interest rates increase due to a loss of the AAA credit rating and if property holders have to sell if they cannot meet repayments when they have to pay capital/interest after the interest only period. So maybe the RBA will have to push rates down if this happens so the buffer is 1.5% but may be forced to go towards 0 or negative if the property market turns as the RBA cannot really raise rates without causing defaults. Thinking 5-10 steps ahead here. A possible reason for a fall in the AUD. Looks precarious. Wait and see. Looks like a lot reasons for the Gold price to upwards in AUD terms.
Have a great weekend.
Regards
Lverty
Extract
Interest-only loan 'worries'
Kevin Davis, finance professor at Melbourne University, said APRA and the RBA had
jointly stress-tested big banks for a 40 per cent fall in house prices and 10 per cent
unemployment and found they would still have adequate capital, so they looked
"unquestionably strong".
But Professor Davis said he was alarmed at how the banks had allowed interest only loans - where the borrower makes no repayment of principal for the first five or even 10 years - to swell to 40 per cent of their loan books only 10 years after the global financial crisis.
"The notion that banks have just been pushing interest only loans out the door only 10
years after the global financial crisis - that worries me very much," he said.
(20min delay)
