Gold hoarding mentality triggered by the return of aggressive QE “All hands on deck”

All hands-on deck

All hands-on are getting called on deck to support growth, but will it be enough. The strength of this V-shape recovery is increasingly coming into question. To at minimum stop, never mind reversing the downward economic spiral; the post-crisis policy response will need to be stronger. But, following several years of slowing growth, the market is starting to believe that the PBoC policy tool kit is constrained on both the fiscal and monetary fronts. And despite supportive lip service out of Beijing, absent a policy deluge the markets remain circumspect.

Risk-off has taken hold of global markets as investors are growing incredibly concerned that the market could be on the verge of a massive meltdown as we are moving well past the weak Chinese recovery scenario. (Even though the market is inherently suspicious of any data coming out of China). Still, we've probably severely underpriced China's economic fallout .

But beyond the inconceivable human cost, traders are now hedging for the massive drop off in business activity around the globe of proportions the world has never dealt with before due to fears of a super spreader disruption.

Countries declaring red alert travel restriction could start toppling like dominos, and if the travel bans cause Tokyo to rethink 2020 Olympic plans or even cancel, these shockwaves will crush market sentiment, and the program selling would kick in.

With little to no policy wiggle room from ECB, BoJ, or other NIRP economies central banks to toggle monetary policy lower, the prospect of unconventional policy measures will start to gain momentum. Quantitative easing is a controversial and unconventional monetary policy measure, but with both the BoJ and ECB, traditional policy took kit emptied. The Corvid 19 my force central banks to reconsider QE early in 2020 which is probably now responsible for today's gold hoarding mentality.

At the same time, the US dollar is being favored in the currencies market as it retains a favorable interest rate differential with many countries, but this is the cleanest dirty shirt argument and the best townhouse in a dilapidated section of town.

Gold markets are looking through the stronger" by -default" USD. Instead, investors are focusing the FED Watch, which is now showing a 55 % probability of a Fed cut in April up from less than 1 % at the start of 2020.

The prominent driver of gold upside is and will continue to be the accommodative and responsive nature of the Federal Reserve's monetary policy stance.