According to Wicksell, when the market rate is below the natural rate, there is an incentive to borrow and reinvest in an economy at the higher natural rate. This normally leads to an economic boom until demand drives up the market rate and eventually chokes off demand. When the market rate exceeds the natural rate, borrowing slows along with economic activity eventually leading to a recession, and the market rate again falls back below the natural rate. Wicksell viewed the divergences between the natural rate and the market rate as the mechanism by which the economic cycle is determined. If a divergence between the natural rate and the market rate is abnormally sustained, it causes a severe misallocation of capital.

Gold can’t seem to catch a break. The yellow metal normally acts as a safe haven in times of political and economic strife, but in the face of Turkey’s lira meltdown, investors have taken cover instead in the U.S. dollar. On Monday, the stronger greenback pushed gold to end below $1,200 an ounce for the first time since January 2017.

Flows this week

SGE Withdrawals for July were 137.4 tonnes

Turkey imports for June

Sales for July

Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars. That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000 percent, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.

COTs this week

ETF inflows have steadied at low levels in recent quarters, making for weak y-o-y comparisons. Q2 jewellery demand dipped 2% to 510.3t, largely due to a weaker Indian market. The pace of central bank buying also slowed in Q2 (-7%). Bar and coin demand was virtually unchanged as growth in a few key markets cancelled out weakness elsewhere. Technology demand provided some relief, adding 2% to reach a three-year high. Gold supply notched up a second consecutive quarter of growth, (up 3%) reaching 1,120.2t.