Financial Analysis, April 20 – April 29, 2022

Apr 29, 2022

Market Overview



The World


The global monetary system is undergoing an epochal reversal.


February 27, 2022, will enter economic history as a great turning point, a turning point that creates an epoch. On February 27, the member states of the European Union declared Russia’s foreign exchange reserves unusable. This procedure is harmonized with the USA, Great Britain, Japan, and other countries attributed to the Western world. In addition, Russian banks are specifically excluded from the SWIFT system and thus excluded from international payment transactions.


Huge increases in producer prices, which are now over 30% in the eurozone and more than 20% in the US annually, will continue to boost consumer price inflation in the coming months. Especially in the eurozone, there is great uncertainty about whether the spiral of sanctions against Russia will continue to be tightened or will be relaxed soon. There are many indications that further aggravation can be expected.




Wages of 116.2 million American workers fell in real terms in 12 months by 3.7% and this is the biggest drop in wages since 1980.



The real incomes of over 50 million retirees are falling due to double-digit inflation.

Over 85% of American households earn less than $ 150,000 a year.


Sales of new residential real estate fell by 8.6% monthly to 763,000 units (annual presentation) after 1.2% earlier (revised by 2.0%).

The U.S. trade deficit widened to a new record $ 125.3 billion in March, as the value of imports far exceeded exports.

U.S. imports of goods rose 11.5 percent to a record $ 294.6 billion, driven by a sharp rise in the value of industrial inputs, including oil imports.

GDP in the first quarter of 2022 fell by 1.4%.




It can be assumed that the forthcoming interest rate increases by central banks will be limited. The key interest rate of the US Federal Reserve is unlikely to exceed 3%; and the European Central Bank is also likely to raise interest rates to a lesser extent, to about 2 percent. Even if consumer price inflation declines somewhat in the next year or two, real interest rates are likely to remain in negative territory and the value of money will continue to decline over time. However, the “external effect” of the increase in interest rates will be: Central banks are doing something about unwanted inflation.


“Financial repression” will continue as long as people are “at peace” and there is no escape from fiat money, sight accounts, time and savings accounts, and debt securities shown in fiat money. Avoiding such an escape requires people to continue to believe and be convinced that inflation is temporary, unwanted, that it will fight, and that it will soon return to an acceptable level. Anyone who hears and reads the comments of central bank advisers will recognize that they are striving for this very goal: to calm people, to maintain their trust in bad money, to dispel doubts about it.


However, if people wake up, see through the devaluation fraud, and react to it consistently, then great shocks can be expected in the financial and economic system. Hyperinflation is then inevitable, and hyperinflation is a possible extreme result. The flight from money can then end only with a strong recessive monetary policy – which, however, would very easily lead to the collapse of the fiat money system: recession, mass unemployment, non-payment of loans, the collapse of banks. But will rulers and governors be willing to bring about such an outcome to preserve the value of money from ruin?




The ECB has bought over $ 5,000 billion in debts of bankrupt European countries since 2014, believing it can keep inflation below 2%.

Today, official inflation is 7.5%, but real inflation ranges from 11.3 to 16.4%, depending on the country.

The ECB has decided to abandon its crazy policy of negative interest rates, because ten-year bonds had a negative interest rate of -0.5%, while now the interest rate has been raised to + 0.9%.

If there has been double-digit inflation and recession at negative interest rates, what will happen to the economy when interest rates start to jump?

The ECB has completely lost control over its monetary policy.

The ECB announced that the total position of gold is 604.5 billion euros, while the position in foreign currencies is 328.5 billion euros.




Russia has increased exports by 27.8% since the beginning of the intervention in Ukraine, while imports have increased by 7.2%, but exports to India are even higher by over 30% during the same war period.

The central bank cut interest rates from 17% to 14%, and the central bank’s key rate is expected to fall to 12% by September.


The Russian stock exchange reacted to the fall in interest rates, the stock index increased by 2.04%.

Interest rates on loans are expected to fall by 2-3% in May.

Mortgage loans will fall from 17-19% to 10-15%.

The central bank predicts inflation in 2022 of 18-23%.


The Bank of Russia raised the forecast for the outflow of capital from Russia in 2022 to 151 billion dollars from 75 billion dollars, according to the medium-term forecast of the regulator. The forecast for 2023 has also been upgraded: now the Central Bank predicts an outflow of the capital of 69 billion dollars instead of the expected 60 billion dollars.

At the same time, the forecast for 2024 has been lowered: the regulator now expects an outflow of capital from the country at the level of 24 billion dollars instead of 55 billion dollars.

It is incomprehensible and inadmissible to allow such an outflow of capital from Russia, which is blocked by Western sanctions and is at war with Ukraine.


The export duty on wheat from Russia from May 6 to 12 will amount to 120.1 dollars per ton, on the export of barley 73.5 dollars, corn 58.3 dollars per ton, according to the data of the Ministry of Agriculture.

The rate of export duty on wheat and meslin (a mixture of wheat and rye) was calculated at an indicative price of $ 371.6 per ton, for barley $ 290, and for corn $ 268.4 per ton.

The export duty on wheat from Russia from April 27 to May 5 is 119.1 dollars per ton, on the export of barley 73.3 dollars, corn 54.9 dollars per ton.




How COVID affects China’s GDP is given in the example of cities and closures. Cities participating in 50% of GDP in mid-March were at level 0 or no limit, but that picture changed in mid-April and only 5% of cities were on a free regime, while 40% of GDP was in cities under tighter control and closure.



Is President Xi Jinping punishing the 26 million inhabitants of Shanghai and cruelly locking down the entire city just because his biggest opposition is in Shanghai.

There are twice as many ships in the port of Shanghai as last year.



In March, industrial enterprise wages rose 12.20% year on year from 4.20% earlier. In the first three months, year-on-year growth was 8.5% after 5.0% previously (two-month period).




The central bank calculated that by introducing an embargo on Russian gas, German GDP would fall by 5% and that several million people would be unemployed.

Berlin even asked the United States for a resolution of the Bundestag a few years ago to return about 4,700 tons of German gold deposited in the Federal Reserve, but that has not happened yet.




In the period from 2013 to 2016, the French central bank secretly repatriated a total of 221 tons of gold to its homeland. Since then, all monetary gold has been stored at La Souterraine in Paris. The repatriation of all gold relates to the goal of France to revitalize Paris as a center for the gold trade.

Energy prices rose 26.6% in a year.


United Kingdom


Over 5 million citizens are affected by the growth of utility costs for the first quarter of 2022 by 50% and must choose between food and heating.

More than 50% of the British population will not be able to pay their bills in the next few months.


Britain must answer what happened to the gold that many countries deposited in 1945. According to well-informed banking sources, there is no such gold.

Germany was among the first to ask Britain to return a part of its gold and had to wait five years, and when it was returned, it turned out that the gold bars were not the ones that were originally deposited.




The whole world is watching Ukraine, the real calculation of global financial stability could happen in Japan. Both the yen and the yuan have recently fallen against the U.S. dollar, reflecting a fundamental split in monetary policy. Japan and China are the two main central banks that are currently giving in, while the United States is tightening inflation. According to Albert Edwards, this deviation will lead to catastrophic market consequences. For him, it is “the greatest story that no one tells.”




South Korea

The consumer confidence index rose from 103.2 to 103.8 points in April.



In line with expectations, the central bank of Hungary increased the key interest rate from 4.40% to 5.40%. The investment rate was also adjusted from 4.40% to 5.40%.




The trade balance in March showed a surplus of CHF 2.988 billion after CHF 5.882 billion earlier. This resulted in the lowest surplus since December 2020.

The Swiss Federal Customs Administration (FCA) recorded imports of about 365.8 tons of gold, silver, and coins worth CHF 10.66 billion in March. In contrast, the country’s exports amounted to about 338.9 tons of gold, silver, and coins worth CHF 8.7 billion.


The Swiss central bank starts the year with a loss of billions.

In the first quarter of 2022, the National Bank recorded a loss of 32.8 billion Swiss francs. The reason for this is losses from the valuation of foreign currency.

The loss of foreign exchange positions, therefore, amounted to CHF 36.8 billion. The gold fund, on the other hand, was worth 4.2 billion francs more.




DOWJ – 33,707

DAX – 14,132

S&P – 4,247

NASDAQ – 13,456


After Twitter’s approval: Many questions about Elon Musk’s purchase on Twitter remain unanswered.


Twitter’s board initially rejected Musk’s offer to buy Twitter for $ 44 billion ($ 54.20 per share). This purchase price was approximately 38 percent above the closing price on April 1, but significantly below the previous record level that Twitter shares recorded on July 23, 2021, at $ 73.34. Mask described his offer as “the best and final offer”. Initially, however, the offer met with little approval: Twitter sometimes even threatened a “poison pill”, i.e. a ban on the enemy acquirer to buy shares in this company – only other investors could then trade securities at a reduced price. Musk immediately responded with allusions to the “tender”, which, in investment jargon, means that investors sell shares directly to an enemy bidder – bypassing the board of directors.


A very notable event occurred on Monday: after difficult negotiations, the Twitter board finally approved Musk’s offer to buy. Musk will directly contribute $ 21 billion from its own funds and will finance about $ 25.5 billion through loans from large banks and a mortgage on its Tesla shares, according to CNBC. In addition, Twitter stressed that “there are no financial conditions to process the transaction.” From a purely formal point of view, Musk’s path to becoming the sole owner of Twitter is clear – it’s just a question of what the 50-year-old plans to do with Twitter.




The price of gold is $ 1,912 / ounce.


The Chinese yuan alone will not be able to take on the role of the US dollar in the foreseeable future, even if China is now the most important trading partner for two-thirds of all countries. However, a lack of convertibility, a lack of trust, only rudimentary legal certainty, and a relatively small bond market make it unlikely that the yuan will be able to replace the US dollar in the near future.


Therefore, 50 years after the gold window was closed, there is no bad chance that gold will be able to play a role in the inevitable reorganization of the world monetary order. Gold, for example, is politically neutral. It does not belong to any state, political party, or institution. At the same time, this neutrality could serve as a bridge of trust between the geopolitical power blocs that are currently emerging.


Nearly five decades since the gold window closed, the hypothetical coverage of the U.S. dollar with gold has fallen from 14%, which was already low then, to just 8% now. The significant drop in gold coverage is shown in the last column:



Central banks have by no means given up on gold. Gold coverage has usually only dropped so much because the money supply has expanded so much. The share of gold in foreign exchange reserves reached its lowest value in 2015 at only 8.4%. It has since increased by more than 50%.


Central banks from emerging and developing countries such as Turkey, Russia, China, India, Sri Lanka, and last year Thailand have been among the most important buyers of gold in recent years.


On the other hand, Western countries have kept their gold reserves at best, but in some cases, they have significantly reduced them. Special mention should be made of Switzerland, which reduced its gold reserves by 60 percent. Britain fell from the top ten after falling by almost 50 percent, as did Portugal and Spain.


How much would gold be valued if the central banks started to use it more monetarily, i.e. not only as a means but if there was an obligation to buy it or at least to cover it. For this purpose, we calculate the so-called shadow gold price. By this, we mean the price of gold that would be incurred if the central banks or the banking system carried out full or higher percentage partial coverage of the corresponding monetary aggregate.


Interest rates are falling as the price of gold rises.



What should be the price of gold?

Let’s look at the estimate in relation to the money supply.

This is the best way to see how much gold is undervalued.






We have said this many times before: physical gold is money; it is the basic money of humanity. The purchasing power of physical gold and silver cannot be devalued by central bank policy, and physical gold and silver do not bear the risk of non-payment such as demand deposits, time deposits, and savings deposits with banks. If the forthcoming central bank interest rate increases do not end the period of financial repression, as we suspect, it would be good for the investor to be advised to keep part of his investment capital in the form of physical gold and silver.



Silver fell to $ 23.17 / ounce.



Oil remained at $ 108 / barrel.



The dollar is getting stronger – 1.0515 against the euro.


Russian ruble

In recovery against the euro – 74.6126

In recovery against the dollar – 70.9650


The ruble is getting stronger because Putin decided to sell energy to non-friendly countries for rubles.



Bitcoin today at – $ 38,953.

Ethereum in slight growth – $ 2,861.



Branko Dragaš

Investment banker


Market Overview