Central Bankers are “Scared to Death of Deflation” and None of Their Stimulus is Working…
By: Mike Gleason
GoldSeek.com
Monday, 20 June 2016
Mike Gleason: It is my privilege now to welcome in Dan Norcini. Dan is a professional off the floor Commodities Trader bringing more than twenty years of experience in the markets. Dan’s editorial contributions and supporting technical analysis charts cover a broad range of trade-able entities including the precious metals in foreign exchange markets, as well as the broader commodity world. He is a frequent contributor to both Reuters and Dow Jones as a marketing analyst and can be found as a source in the Wall Street Journal’s commodity section from time to time, as well as CBS’s Market Watch. You can follow his fabulously detailed work at TraderDan.com.
Dan, welcome back it’s great to have you on again, how are you sir?
Dan Norcini: I’m doing well Mike, thanks. It’s always a pleasure to be with you, looking forward to our chat here today.
Mike Gleason: Well we’re seeing some pretty interesting market action here this week, specifically the Fed decision on Wednesday certainly seemed to light a fire under the metals market initially but now we’re seeing them pull back a bit as we’re talking here on Thursday afternoon. So what do you make of the action this week Dan?
Dan Norcini: It reminds me of a scene in the original Planet of the Apes. It’s a madhouse; that’s what I make of the action Mike. We’ve got a very, very high degree of uncertainty now in the markets; a lot of elevated concerns. You’ve got the VIX, the Volatility Index is at elevated levels. The Gold Volatility Index is kicked up. We’re seeing some pretty big price swings in the interest rate market – the long bond, the ten-year. We’re seeing some big movements in the oil market. The crude oil market has been particularly hitting hard this week, as well. We have a lot of uncertainty tied to two things, Mike. Mainly, Central Bank comments and activity, or actions, and of course the upcoming Brexit vote.
One thing that I’m noticing lately is that investors and traders tend to look for some sort of – what’s the word I’m looking for? Comfort might be too strong of a word – but a little bit of confirmation from Central Bankers when they’re making comments on the economy. They like to see a little bit of certainty, where they feel like the Central Bankers have a pretty good handle on what’s going on so they can initiate a correct monetary policy response. But what they’re getting this week is unnerving them. They’re looking at Janet Yellen’s testimony that we got out here on Wednesday, yesterday. We’ve got the subsequent statement that came out there. Then, of course, we have the Bank of Japan overnight here.
And the words that are coming out of these Central Bankers are not giving a lot of comfort to anybody. As a matter of fact, they’re creating more nervousness and uncertainty because the general feeling is that the Central Bankers are unsure of what’s coming next. Their policy that they’ve done to generate this inflation toward 2%, which is what they’re all looking for, it’s not working. What’s amazing to me, Mike, is that every single time that you get a statement, coming out of one of these Central Bank meetings recently, they still talk about this 2% inflation goal. They still talk about achieving it, but every time they mention it, it gets kicked down further down the road. First it was the latter part of 2016. Then it moved into 2017. Well, heck, now we’re talking about maybe late 2017, 2018 before we get to a 2% inflation rate. You get that thing repeated often enough and it creates a lot of nervousness among investors because they feel like Central Banks don’t even know what’s going on.
Of course, now you have the uncertainty with the upcoming Brexit vote. That’s adding even more fuel to the fire of uncertainty. And of course you’re getting a lot of volatility now as traders either try to move to the sidelines ahead of this vote, or position themselves in the direction they think the markets might go depending on the outcome of that vote. Quite honestly, nobody has a lot of conviction about anything right now. And that’s why you’re just seeing these big price swings.
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