Macro Voices episode 545 features Michael Howell discussing the global liquidity cycle, which has peaked and is declining. He argues that gold has bottomed and is poised to rally, driven by China's liquidity expansion, while oil prices are set to rise significantly. Howell expects the Fed to hike rates despite political pressure, and warns that rising bond yields could pressure risk assets.
Summarized by Podsumo
Global liquidity cycle is declining, with a trough expected in mid-2027, as strong real economies drain liquidity from financial markets.
Gold has bottomed and is likely to rally, driven by China's PBOC liquidity expansion and internal devaluation, not Western demand.
Oil prices are expected to rise significantly, with the gold-oil ratio suggesting oil could reach $135-200/barrel if gold stays at $4,000.
Kevin Warsh will likely hike rates despite political pressure from Trump; the two-year Treasury yield predicts higher policy rates.
Commodities, especially energy and industrial metals, are set to outperform as the liquidity cycle shifts from speculation to turbulence.
The 10-year US Treasury yield could test 6% due to rising nominal GDP growth from fiscal spending and AI boom.
Short squeeze in yen after intervention, with yen positioning still net short, suggesting further upside potential.
Uranium and mining stocks are showing first signs of a potential trend reversal after months of flat trading.
"The gold price is going up now because of China's historic debts. The liquidity injection from the People's Bank is all about trying to devalue the Yuan internally, and that is what's driving gold up."
— Michael Howell
"If you believe that the gold market is underpinned at $4,000 an ounce, and we take the long-run average gold-oil ratio historically at about 20 times, you get a $200 a barrel oil price."
— Michael Howell
"The Federal Reserve can't resist [rising bond yields] very easily... It's the long end which drives the short end, not vice versa."
— Michael Howell