In the past 24 hours, we have seen examples of central bank surprises that have taken markets by surprise by lowering interest rates. The New Zealand dollar fell as a result of a 50% drop in interest rates. In addition, the Bank of India unexpectedly reduced their their reverse repo rate by 35%. The Bank of Thailand also surprised markets by reducing interest rates by 25%.
In the meantime, one asset that can outperform the rest will be gold. Indeed, in an environment where interest rates have fallen, treasury yields and exchange rates decline, this yellow metal can work well in such an environment.
Also, it is not surprising that, unlike the S & P500, which experienced slight changes yesterday, investments performed worse than all sectors (-1.21%). Specifically, the banks' shares were down 2.15% overall. The Fed has lowered interest rates to help boost economic growth to counter the threat of a trade war, which has essentially eroded the potential for bank profits.
Gold prices continued to rise on Wednesday. In the current environment of the economy, where expectations are set in an environment of widespread monetary stimulus, investors buoyed the relative appeal of non-interest-bearing alternatives.
Not surprisingly, this has created grounds for lower support for cycle-sensitive crude oil prices. EIA investment data, which shows unplanned reserves, indicates an increase of 2.39 million barrels for the past week, driven by sales pressure, sending the WTI benchmark to levels unseen since January. Reports citing an unnamed Saudi official saying the kingdom will not tolerate continued weakness helped prices steady a bit late into the session.