Commodity Trade Mantra

Posts Tagged ‘Currency Wars’

If the Fed does What it Wants to, the Result will be the Opposite of What it Wants

The US economy is slowing perceptively. What should the Fed be doing? They might want to cut interest rates. Problem. Another tool in the arsenal – cheapen the US dollar. Again there is a problem. Whether that works & what is a good idea are separate issues. Certainly a rate hike would take the stock market down 20%. It’s going to be just the opposite of what the Fed wants.

More Reasons to Own Gold and Silver With Each Passing Day

Does a 0.25% Fed Funds rate increase really change the fiat currency destruction policy adopted for decades & provide an impetus to sell gold and silver in exchange for devaluing paper & digital fiat currencies? There is no end in sight to the fiat currency purchasing power devaluation objectives of Central Bankers & start converting fiat currencies into wealth preserving physical gold and silver.

No Sound Reasons for the Gold Price to Stop Rising - Nor Can Anyone

I think the gold price will continue to do so in the years ahead. There is an important change of trend taking place. Charts too indicate it is the start of a multi-year bull market. That doesn’t mean gold won’t fall from here. It’s had a big run & some profits booking can happen. Is there a solid fundamental reason behind the gold price surge? Read on to know the reasons.

China needs a lot of Gold to make-up for the Loss Expected on Treasuries

Right now, China’s reserves are about $3.2 trillion, of which about $2 trillion is denominated in US dollars, and most of that are U.S. Treasury Securities. They can’t dump them. So what the Chinese are doing instead is they’re acquiring gold as a hedge. China is going to be in this position where they lose on the paper, but they make it up on the gold.

We’re Near a Major Turning Point in the Currency Wars

In the currency wars, it looks like a recent quiet period is over and war is entering a new major battle. The US dollar went from an all-time low in August 2011 to a 10-year high in mid-2015. But the strong dollar finally caught up with the US economy, which has been slowing down precipitously. There are critical turning points where a long-term directional trend is set to reverse.

Why is the Whole Pie Shrinking? Well - It's Recession Time

We are picking up signals from a source even more powerful than central banks. This source is the specter of global recession. One of the other signals is the shrinkage in world trade. You can have a reduced trade deficit but still find that exports and imports are both shrinking. It means the global trading economy is shrinking: a sure sign of recession.

The US Dollar Has Just Been Shanghaied By The G-20

The main meeting of the G-20 finance ministers and central bank governors was conducted with much publicity. A secret side meeting of a core group consisting of the US, Europe, Japan, China & IMF in Shanghai on Feb. 26, resulted in the biggest dollar take-down operation since the Plaza Accord of 1985 & will go down in history as a major turning point in the international monetary system.

Can the US Dollar Face Down the Chinese Yuan?

The decision to include the Chinese yuan in the SDR is a political decision, not an economic one. Including the Chinese yuan is a “seal of approval” by the world’s major financial powers, led by the United States. It means China is a financial superpower and deserves a seat at the table when the international monetary system is reset.

Currency Wars Become Much Nastier During Recession Times

All central banks have printed trillions of dollars in their respective currencies under various QE programs. They are at the point where they simply cannot print trillions more without risking the collapse of confidence in their currencies. How will central banks stop the recession when they’ve used up their dry powder fighting the currency wars?

Central Banks Behind Slowdown in Global Trade

Over the past decade, all central banks went into overdrive with currency devaluations. This has done more harm than good. A currency war between developing nations is likely to be more damaging than thought, leading to a reduction in global trade & possibly economic growth, rather than just reapportioning a fixed level of trade between winners & losers.

An Insight into the Future Price of Gold

Real interest rates are one of the best predictors of the nominal dollar price of gold. When real interest rates are low (or negative), that gives gold a boost. When real interest rates are high, that puts downward pressure on gold. This easily understandable correlation is much stronger than other correlations such as the stock market or economic growth.

Latest Currency War Entrant: India Warns May Retaliate To Chinese Devaluation

RBI governor Raghuram Rajan: “We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee.” Economic realities are economic realities and a currency war is a currency war, which is why, we suppose, the Indian government’s chief economic advisor Arvind Subramanian thinks the country might just have to hit back.

The Facts About Gold and Gold Speculations

Excessive debt is deflationary. Central banks can’t tolerate deflation so inflation is their game. They will print more & more. Global debt (official), not counting unfunded liabilities, exceeds $200 Trillion. It will increase but probably will not be paid. More debt means more currency in circulation, currencies are devalued, and gold becomes more expensive.

Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO

Believe whatever hype you will about gold and silver primed for a major turnaround, and we are in the camp wanting to see higher prices, but we remain pragmatic in putting far greater belief into what the market is saying, via developing market activity, a much more reliable indicator of the character of the trend, and both trends for gold and silver are decidedly down.

China Destroys the “August is a Quiet Month Myth”

After a long period of pegging the Chinese yuan to the US dollar at about 6.1-to-1, China devalued the yuan in a sneak attack on August 11, devalued again Wednesday & Thursday. The total devaluation is almost 5%, the biggest devaluation in over 20 years. Normal daily volatility in foreign exchange markets is measured in 5 decimal places. 0.05% is a choppy day. 5.0% is an earthquake.

Gold Is Down. Remember - Fed will achieve Inflation ‘whatever it takes’

If the Fed maintains its tight money mantra in the middle of a deflationary currency war, then gold & other commodities could go a bit lower. My expectation is the Fed will wake up to the damage it’s doing and reverse course. The commodity and currency markets will soon hear the message that the Fed will achieve inflation ‘whatever it takes’. And then – gold will once again shine.

Currency Devaluation: The Crushing Vice of Price

When stagnation grabs exporting nations by the throat, the universal solution offered is devalue your currency to boost exports. Currency Devaluation is a bonanza for exporters’ bottom lines, but has a negative consequence: The cost of imports skyrockets. When imports are essential, the benefits of devaluation may be considerably less than the pain caused by rising import costs.

Federal Reserve Fairytales: 15 Reasons Fed Policies Belong in Fantasyland

If you add all this up – all the forward guidance, all the dates, all the targets, the currency wars, operation twist, all the flavors of QE, 15 separate fed policies in 5 years, that tells you, you don’t know what you’re doing. You’re making it up as you go along. So people should have no confidence in the Fed. That’s for starters.

A Hard Look At Gold via 7 Technical Charts

Looking at gold from different angles chart-wise, gold looks like its nearing a make-or-break level. Gold and silver miners are also consolidating near their support level dating back to 2002. Inflation expectations are also nearing a breakout / breakdown point. Soon we will know more about the true state of the global economy.

Gold is (Once Again) Money

What China and Russia have in common is they are both protecting themselves against dollar & oil price manipulation by converting their export sales into gold. They are using gold to hedge dollar exposures in Treasury securities & oil respectively. While investors may have missed this development, other central banks have not.

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