“Yes indeed,” said Peter Cardillo, Chief Market Economist at Spartan Capital Securities, in a conversation with ET Now. “It caused their currency to take a pretty steep dive and again that is against the dollar and that ignited a very powerful rally in the Japanese stock market and it will probably continue for another day or two.”
Cardillo noted that investors are optimistic about potential monetary easing. “It looks as though there is a good possibility that stimulates will be cut back and the possibility of a rate cut is on its way and so, the Japanese stock market applauded the election of the first female ever prime minister,” he added.
Meanwhile, gold continues to capture global attention as it pushes to new record highs. Despite repeated calls that the yellow metal might have peaked, prices have continued to climb, now sparking speculation about the possibility of $5,000 per ounce.
“It is very real,” Cardillo said, referring to the bullish momentum. “In fact, my near-term target is 4150 and so after that it could level off for a while but eventually we go into 5,000. All the ingredients for the gold market to continue to rise are in place and it was long coming.”
He pointed to central bank buying and persistent market uncertainties as key drivers. “From fundamentals perspective central banks continue to be big buyers and this is a key point. But, of course, with the stock markets continuing to reach new highs, the gold market is a good place to bet your hedges,” Cardillo added. Turning to US bond yields, Cardillo noted that markets are bracing for upcoming Treasury auctions that could test investor appetite. “It has been up one or two days and the reason for that is this week, in fact, beginning today we have the three-year auction and then followed by the 10-year and then, of course, the 30-year and the market is positioning itself for those bond auctions,” he explained. He cautioned that demand might not be strong given the ongoing policy uncertainty. “I do not see a very strong demand and the reason why I say that is because again the possibilities of the Fed still holding off before becoming aggressive in terms of cutting interest rates is very real and that is because of the sticky high inflation that we have,” he said.
Cardillo also flagged that a potential US government shutdown could alter the Fed’s stance. “Now, one could make the case that the government shutdown, if it were to linger, let us say, over two or three weeks, then there is a good possibility that the Fed could become more aggressive and actually cut by 50 basis points, but that is yet to be seen,” he concluded.
As global investors weigh Japan’s leadership shift, gold’s rally, and US bond market signals, the broader picture remains one of cautious optimism mixed with persistent uncertainty.
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