Commodity Trade Mantra

Posts Tagged ‘Currency Volatility’

Why are Central banks Forcibly Loading up on Gold?

Ordinarily central banks are more apt to shed gold than buy it. But now is not a normal time & so are loading up on gold. As currencies grow more unstable, central banks will seek a “bridge” that holds value in the midst of currency volatility & diversification away from the US dollar. That bridge seems to be gold, as it certainly doesn’t seem as if many other logical asset choices exist.

The Market is Simply not Expecting Renminbi Devaluation to Happen

The Chinese seem to have changed the focus of their monetary policy from one that targets the exchange rate to one that targets domestic money supply growth. This shift will only serve to increase the divergence between the Fed and PBOC monetary policies and put more downward pressure on the renminbi.

Expect Physical Gold Backing of Currencies Within Next Decade

The whole precept that printing money is good, that somehow zero or negative interest rates are good, is totally fallacious. Unimaginable & yet somehow the investment public has bought into it. So probably in less than 10 years we will see physical assets backing currency. Of course, the most likely physical asset is gold.

Emerging Markets Banking Crises Are Next

The concern for emerging markets is that carry trades and subsequent inflows of capital have created substantial credit and real estate bubbles in many of these markets. The unwinding of these bubbles is likely to lead to banking crises in several countries, including China.

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