Tread carefully as price action never lies ( Gold,Oil, Stocks and The Ringgit)

Yup, every time I turn around, there's another alert

Japan's government has urged all sporting and cultural events to be canceled for at least two weeks, which, of course, will be followed in lockstep by every organization countrywide, certainly not great for the economy over the short term. But is this the foreshadowing of things to come causing Tokyo to rethink 2020 Olympic plans or even cancel? Such shockwaves will trigger a massive Tsunami that will crush whatever remnants of bullish sentiment that remains in the market.

With little policy room for the ECB, BoJ, or other NIRP economies central banks to toggle monetary policy lower, all roads lead back to the Fed and G-20 fiscal pump.

 

Gold markets

Gold did not rally even as equities, yields and the USD fell. Wall Street closed down 3%, the yield on the 10-year Treasury fell to record lows. They're also a sharp sell-off in junk bonds. 

Usually, this would have driven gold higher. By no means do today's events mean the gold rally is over.

At this point, I continue to attribute the current weakness to a combination of profit-taking,  and liquidation to raise cash, likely related to margin requirements. There's president of steep equity sell-offs in the past that have all triggered gold sell-offs the following trading day. Although the lack of a significant bounce back from the late NY self off is a bit disconcerting

The big question for gold investors is what happens to the gold markets when the risk markets come back to life once the concerted fiscal efforts from G-20 governments step in to cover the markets back again?

Tread carefully as price action never lies.

 

Oil markets

Oil market reaction function to all things Covid 19 is to sell first as questions later. The Oil market has moved beyond the sniffle stage as a super spreader raises the potential for higher lost demand today than at any point in history.

Early estimates of the coronavirus impact on oil demand growth have been well underestimated. Yet, prices have remained supported at the range lows through the virus showing up on US doorstep. All the while, the oil industry sits precariously perched while hopping on a wing and a prayer for a fiscal policy pump from G-20 as containing the virus is going to be a Herculean task. But we're likely one US cluster virus outbreak away from oil prices falling into the abyss.

 

The Ringgit 

The ringgit is getting put through the wringer again as Fitch is chiming in the "turmoil" in Malaysia may impact medium-term fiscal outlook. Indeed, not an optimistic sign for credit rating outlook and which could put further downward pressure on the ringgit. Let's see what the budgetary pumps have in store, but even that is unlikely to raise the beleaguered ringgit from the ashes.