Gold has reached another record high, surpassing $4,600 per ounce, as open warfare erupts in Washington between the White House and the Federal Reserve.
As we reported yesterday morning, the US Department of Justice has served subpoenas on the Fed, alleging that its chair, Jay Powell, lied during congressional testimony in mid-year.
Powell immediately hit back, saying that, in effect, this was nothing more than an attempt by President Donald Trump to bully him into lowering U.S. interest rates. He would not, he said, bow to presidential pressure and compromise the independence of the Fed.
The US dollar is the global reserve currency, and the US economy is the largest in the world.
The Federal Reserve – their central bank – sits at the heart of the system. London’s Financial Times calls it the world’s most important financial institution.
Any risk to that system via a political attack on the Fed – in this case, from the White House – would cause severe instability. That ripples through the global economy and affects everyone, including us.
You can see why investors are desperately seeking cover in gold.
Turning to central banks, our Reserve Bank has confirmed it’s reviewing the prime lending rate.
This is the rate set 350 basis points above the country’s monetary policy rate, and it has been that way since 2001.
According to the Reserve Bank, there is approximately R6.2 trillion that would be affected by any change to this policy.
But here’s the thing: this same question was asked some 20 years ago, and the Bank concluded that any formal change was irrelevant because commercial banks charge what they want anyway. Loans are priced based on the level of risk.
GLOBAL MARKETS, J.S.E., AT RECORD HIGHS
Turning to the markets and going back to gold, the shares in gold miners on the JSE have also surged, taking the JSE to fresh record highs – the All Share up 1.7% and the Top 40 up 2%.
We also had record highs for the FTSE in London, the Dow and the S&P 500 in New York. The Nasdaq is early there but not quite.
Tokyo this morning is also at a record high, up 3.3% on prospects of a snap general election. Hong Kong up 1% and Sydney up 0.8%.
The US dollar remains at $1.17 to the euro, the rand at R16.41 to the dollar, R19.13 to the euro, and R22.11 to sterling.
Platinum $2,329 – Bitcoin just under $91,200, and Brent Crude oil -back up to $64 per barrel.
