Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Merton
Speaker 1: Talks Money weekly round up, debrief and the biggest stories
Speaker 1: in Marcus and economics this week. I'm join Stepicks, senior
Speaker 1: reporter and author of the Money Distilled newsletter Meurn's out
Speaker 1: this week, so I'm again in the driver's seat and
Speaker 1: back by popular demand, we have none other than Bloomberg opinions.
Speaker 1: Marcus Ashworth. Hih hi Marcus. So today we're gonna get
Speaker 1: any exactly exactly macro. That's a famously easy to predict
Speaker 1: and forecast thing that no Hedge one managers ever come
Speaker 1: a cropper from attempting to do. But I thought we could
Speaker 1: start with gold because gold has been the obvious big
Speaker 1: story this week. I think with so it's a new
Speaker 1: record in dollars, also an ay speG growing number in pounds,
Speaker 1: twenty one hundred squadter owns. And I suppose I'd just
Speaker 1: like to get your views or in why this is happening.
Speaker 2: Just know, well, I like commodities generally. I think clearly
Speaker 2: gold is you know, just a technical analysis overview is
Speaker 2: clearly going to carry on pushing up to new highs.
Speaker 2: If you were just take the fundamentals away, so it's
Speaker 2: trading in a certainly an abolished format. The fundamental reasons
Speaker 2: behind gold going up, I've got no idea. I don't
Speaker 2: think anyone does quite clearly what gold is being driven
Speaker 2: by in recent months and what have you. Is, in essence,
Speaker 2: is something bad is going on the one It doesn't
Speaker 2: matter where in the world it's going back. For instance,
Speaker 2: let's we can see that a lot of money still
Speaker 2: coming out of China as in individual investors trying to
Speaker 2: sort of perhaps put something away where it can be
Speaker 2: literally for any day. So driving I think it's just simple.
Speaker 2: It's it's it's constant demand.
Speaker 1: You know.
Speaker 2: It could be what's going on in the Middle East.
Speaker 2: People want to want to get some money off shore.
Speaker 2: It could be indeed, still the ongoing main driver, I
Speaker 2: think is something from both China and in the state,
Speaker 2: but equally much more in individuals.
Speaker 1: And so because gold you can see as one with
Speaker 1: stuff from a capital fleet from China, cant is that
Speaker 1: fair to see it? Because Chinese people can move it
Speaker 1: to gold exactly that and even although it's stell end China,
Speaker 1: it's kind of not. It's what goes on.
Speaker 2: Well, I'm not sure holding it in China, But that's
Speaker 2: sort of not the point, really, isn't it. But yeah, look,
Speaker 2: I think it's it doesn't matter where in the world
Speaker 2: if something's going really bad and people need to get
Speaker 2: money off. Sure, you know, we know what happens with
Speaker 2: bitcoin from time to time, and gold is in essence
Speaker 2: exactly that. Now you can extrapolate a lot of other
Speaker 2: fundamental drive of what's going on in the world. We
Speaker 2: can see bon yeos going up a lot, everyone's worrying
Speaker 2: about fiscal plans for whoever the next US president might be.
Speaker 2: I don't think that is necessarily the primary diur of gold,
Speaker 2: but I don't think it's holding gold back. Sometimes you
Speaker 2: would think gold would be going the other way because
Speaker 2: of that, But actual fact clear at the moment as
Speaker 2: that it's a momentum trade and people are prepared to
Speaker 2: be quite happily long it. And because if something bad
Speaker 2: goes on on November fifth, sixth seventh, you know, at
Speaker 2: least you know you've got something which is doing it's
Speaker 2: an instancy's silver starting to move as well, because that's
Speaker 2: the sort of the higher beta gold, and that my
Speaker 2: view is that gold is you can't really call it
Speaker 2: an asset in a normal sense of the word, but
Speaker 2: it's it's a barometer of other sort of fear and
Speaker 2: greed in excellence. Both both benefits you, both in greed
Speaker 2: terms and in fir terms at the moment.
Speaker 1: So that was getting well, just a couple of things
Speaker 1: because at the very start there you said can elate
Speaker 1: commodities at the moment, because that's essentially because commodities generally,
Speaker 1: so gold has been growing up, but and places may
Speaker 1: also have been going up bit coppered and the world
Speaker 1: or the rest of them. And oil, I say, it's
Speaker 1: the obvious wine as well, haven't haven't actually been going
Speaker 1: the other week.
Speaker 2: So I meant more soft than I should be more Yeah,
Speaker 2: but I mean, you know, the point here is oil
Speaker 2: is that it is you know, if you want to
Speaker 2: look at one thing to tell you what the world's
Speaker 2: economy is doing, not stop markets. You know, obviously you
Speaker 2: can look at the value of the dollar, you can
Speaker 2: look at the ten year US treasury yield, and you
Speaker 2: would look at oil. And every time oil goes to
Speaker 2: be fair below seventy in the moment, it's getting bought.
Speaker 2: So it shows you that it's got quite a quite
Speaker 2: a firm flaw at the moment, which is pretty low
Speaker 2: in some senses. Quite clearly, you would expect a test
Speaker 2: of fifty rather than a test of one hundred of the moment,
Speaker 2: if you were looking at how the market's been training.
Speaker 2: Every time it tries to rally on Middle East fears
Speaker 2: and what have you, it comes straight back down again
Speaker 2: fairly quickly. And it quite clear to my mind that
Speaker 2: the jibilisical concerns and how oil relates to them as
Speaker 2: is nowhere near as big as it perhaps once was.
Speaker 2: You know, the question is that most people in oil,
Speaker 2: all they focus on is is supply as opposed to demand.
Speaker 2: What's interesting at the moment is that, you know, demand
Speaker 2: is very strong actually, but supplies even stronger.
Speaker 1: I see this. This is key, isn't it? Because you
Speaker 1: would look at the oil place by itself and your
Speaker 1: assumption would be oil goin do and means the global
Speaker 1: economy is slowing. But that doesn't it seems to be
Speaker 1: more to supply.
Speaker 2: Yeah, which I know it should normally. Would you look oil,
Speaker 2: you go okay, that's the economy is telling something that
Speaker 2: the global economy that oil prices coming down. The other story,
Speaker 2: which is harder to get into, and I wouldn't say
Speaker 2: I'm an expert on this, but from what I can
Speaker 2: understand is that the shift in China's demand is probably
Speaker 2: permanently down because they're shifting to gasification. They're moving to
Speaker 2: other types of ecologically more more more sound forms of
Speaker 2: energy wind, solar, et cetera. And I think that is
Speaker 2: quite a fundamental shift that they are going to be
Speaker 2: requiring less and less oil deliberately. Yeah, that's a much
Speaker 2: longer term thing, but you know, you want to have
Speaker 2: to understand that, you know, China can move the old
Speaker 2: market and has consistently. We will see what goes on
Speaker 2: with India it still being requiring an awful lot of
Speaker 2: hydro carbons, and other big economies in Asia particular like
Speaker 2: Japan as well, But for the moment, you know, China
Speaker 2: has always been the mover of this and that that
Speaker 2: may well be no longer the case going going forward.
Speaker 1: Can we get in the geopolitical conspiracy theories for famous?
Speaker 2: Yeah?
Speaker 1: See, because I mean obviously reading a few things and
Speaker 1: obviously wine is it big sort of stories that always
Speaker 1: checks about and there has been kicking a bit for
Speaker 1: twenty UYGLS is this idea of China eventually having the
Speaker 1: ui and or the n men.
Speaker 2: Ben't you that MST named what a winning sort of
Speaker 2: the bricks currency of choice?
Speaker 1: Well, no, I I was thinking just just the yourn
Speaker 1: rather than the bricks, because I think the bricks is
Speaker 1: a sort of fever dream by you know, golden bitcoin,
Speaker 1: kind of bugs with whom I have a certain amoent
Speaker 1: the sympathy. But I think that one's just daft. But
Speaker 1: what you're saying there is basically so if China is
Speaker 1: building out electric vehicles to reduce its reliance on oil,
Speaker 1: and presumably most of that electricity can be generated at home,
Speaker 1: and it's simultaneously trying to build up its gold reserves
Speaker 1: so that it can effectively cut itself off from the
Speaker 1: US dollar system if it needs to or wants to,
Speaker 1: and can provide a sort of alternative payments global payments system.
Speaker 1: I guess for the like say Russia and all the
Speaker 1: other people who don't want to be not.
Speaker 2: How it's further wey than ever was. And that's one
Speaker 2: of the reasons. What's going back to what we're saying
Speaker 2: about gold. The reason why gold's up is because exactly
Speaker 2: that not even Chinese want with it. So no, I don't,
Speaker 2: I think, And that's the problem. You know, as I mentioned,
Speaker 2: it's going to ago. The bricks countries are together as
Speaker 2: we speak and want to basically have at some point,
Speaker 2: you know, an alternative to the US dollar. But it's
Speaker 2: not so much the US dollar, it's the US dollar
Speaker 2: payment system, of which, of fact, the of as far
Speaker 2: off assets control. Basically, the US Treasury can reach out
Speaker 2: across the world and make light very difficult, not just
Speaker 2: by grabbing sovereign reserves like they did for Russia, but
Speaker 2: you know they can block and do all sorts of things,
Speaker 2: rightly or wrongly. But the point here is that the
Speaker 2: alternative to the dollar would have to be the un
Speaker 2: and it isn't ever going to be because of cup
Speaker 2: of controls in the way that the rule of law
Speaker 2: is not applied to be saying in the normal sense
Speaker 2: of the word in China means that any bricks country
Speaker 2: or any bricks alternatives that the units was you know
Speaker 2: they're thinking about, will essentially be the Chinese ran. It's
Speaker 2: not gonna be Russian rouble. And any correlation into India
Speaker 2: repeat that, that's never gonna happen because you know, India
Speaker 2: and China for whatever reason, may I have some or
Speaker 2: a prosh one moment, but they are not friends and
Speaker 2: never will be. And you know, likewise, you know, in
Speaker 2: this context Brazil and South Africa are not are not
Speaker 2: directly relevant. So in that sense, if they want to
Speaker 2: get together, that means they're essentially going to give control
Speaker 2: to Beijing. Is that better than giving control to Washington?
Speaker 2: Obviously not So in that context, I don't think. I
Speaker 2: think it's a non start, and it will continue to be.
Speaker 2: They will obviously be trying to push for into trade
Speaker 2: and denominations, and that's just smart and I perfectly understand that,
Speaker 2: and that's fair enough, but I don't think it's going
Speaker 2: to evolve into anything. What they are most keen on, though,
Speaker 2: is is the payment systems, because you know, separating away
Speaker 2: from using the dollar, you know, it's it's it's the
Speaker 2: how that payment is monitored. And you know, as we
Speaker 2: know swift, the society of worldwide, you know, national financial
Speaker 2: transfers is essentially the payment system of the globe amongst
Speaker 2: the banking systems, and they want to find an alternative
Speaker 2: to that, and that's something which I think they will
Speaker 2: also struggle very hard to do, but I clearly see
Speaker 2: why that's their prime concern. So when you look at
Speaker 2: a bricks currency, it's not really about the currency, it's
Speaker 2: about alternative payment systems which can move money between China
Speaker 2: and any other part of the bricks sort of universe,
Speaker 2: but not getting involved in the essentially a US controlled
Speaker 2: banking payment system.
Speaker 1: And has that been a lot of the interest in
Speaker 1: the CBDC say the things that can digital cut and
Speaker 1: see say the things.
Speaker 2: It's slightly more subtle, But I went to the europe
Speaker 2: Central Bank in June and one of the things that
Speaker 2: really surprised me is the real desire to get a
Speaker 2: digital Europe without really i think, the concept of understanding
Speaker 2: what they're going to create and what monster they are
Speaker 2: going to be left with. Because you know, only seven
Speaker 2: of the area countries have their own individual banking payment systems.
Speaker 1: It's quite extraordinary.
Speaker 2: So you know, we have Chaps or you're going to
Speaker 2: call it in the UK, and it's not applicated across
Speaker 2: the whole wide euro area. So they're ali essentially on Visa,
Speaker 2: master Card and what have you, and they really are
Speaker 2: unhappy about that. So their logic would be credit digital
Speaker 2: euro and a lot of central banks are thinking on
Speaker 2: the line zone in the UK obviously looking at it,
Speaker 2: that's more of a keeping up with the Jones this
Speaker 2: type thing. Yes, sure that they're at least not completely
Speaker 2: left behind, but you know, the concept of allowing the
Speaker 2: government to completely control every payment you make and to
Speaker 2: my mind is horrific. The alternation surely would be to
Speaker 2: create your own privately owned or non government controlled payment system,
Speaker 2: but that doesn't seem to have quite dawned on anyone.
Speaker 1: There, so we could call it bet bet queen.
Speaker 2: You'll never catch on say blockchain a few times, so
Speaker 2: to say blockchain refeatably long of the answer everything.
Speaker 1: You should basically get your by a point of a
Speaker 1: longer chat about that topic, because that's actually really interesting.
Speaker 1: But yes, I think we'll wrap it up there for
Speaker 1: just now. But so thanks very much again. Marcus Marx's
Speaker 1: most recent column ECB should shock and all with half
Speaker 1: point cut spoiler alert, they didn't.
Speaker 2: We are talking about doing it in the someone else
Speaker 2: I think I'm cracking. I'll win on that one.
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