Recap on what happened this week in gold and oil
Rick joins us this Friday to recap the gold and oil markets this week. Gold is having a good week and oil a bad one… Will this be a continuing trend?
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The more I give this thought Silverdollar, the more I think these three China devaluations were targeted at Japan who has been making hamburger of the Yen to stimulate their own export economy and induce inflation. In nominal GDP terns Japan remains the worlds third largest economy even if it is just half of the China economy. But what the Yen is doing regionally is creating resentments amongst all the other exporters. Notice how many Asian countries also went with a similar devaluation along with China. so this may be an Asian story….and the dollar is the sideshow to another agenda altogether.
I tend to agree. The Yen has devalued about 40% against the Chinese Yuan in 3 years. That’s a lot! It’s almost surprising that China didn’t respond earlier. The last really big Yen downmove was late in 2014. It’s interesting that China’s decision came so soon after the IMF SDR basket business recently. Maybe China is not pleased with the result and so decided to make a currency move.
As with the Swiss de-pegging (revaluation) from the Euro some months ago, it hasn’t done much for gold and probably won’t.
Agree the devaluation has been massive for the Yen. I just listened to Marc Faber who was saying that the Yen has declined 80% versus the Yuan in the past couple years. Maybe the really big surprise is that it has taken China this long to respond. And what is even more interesting is how closely this decision came following the IMF’s delay in making the Yuan a part of the SDR basket. That looks like the smoking gun to me and the trigger for the actions the PBOC took. Sometimes we just need to look at the obvious and this is an easy link to make. Whether it was a retaliatory move or not hardly matters. There seems to be some cross current connections related to a whole host of factors from falling Chinese exports to loss of Asian competitiveness and lastly to their rejection from SDR status.
Interesting thoughts from Rick as always, but I am a tad confused by Rick’s comments of the USD going to 120 and gold rallying at the same time.
That would be one BIG crisis in the conventional stock markets.
I don’t believe that is what he said. What I took it to mean was that yes, the dollar is likely to rally in the near future, and this in turn will weaken the Euro further, which in turn will add to the crisis in U.S. stocks, causing them to sell off. And THIS event will change the thinking of the FED towards the dovish side of things and cause them to reverse course on raising rates and possibly even turn back to a QE posture. Which in turn would cause gold to rally.
In other words, the FED isn’t going to accept the deflationary trends for ever.
Ah, OK. Thanks Phil.
bob if usd strengthens that much eps of american companies that are invested abroad will fall drastically and stocks will take a plunge.Then as phil said fed will step in with further qe which will eventually boost gold but not the stockmarket.
well since it is obvious that virtually ALL of the outcomes of a higher dollar are negative then does it not make sense that something else will happen. Especially if Central Banks are as omnipotent as so many here believe ti seems unlikely that the dollar would be permitted to rise. Look at this another way….and perhaps from a geopolitical and strategic angle. If the standard correlation is for oil to rise with the Euro then it seems a straight forward task to directly impact oil prices via friendly nations and thus push up the Euro while sinking USD. For that matter, any major supply constriction will benefit a dollar decline and this should probably be anticipated. I believe oil will bounce in the coming week and the dollar will continue its declines. That will most likely be precious metals positive for the silver lining. But lets not kid ourselves…..if a rising dollar is as dangerous as everyone seems to agree and TPTB really have the ability to move markets then the dollar will NOT go to 1.20 anytime soon
Forgot to say, but surely on the way to 120 USD would cause gold, and all commodities, much lower in such a scenario with a strongly rising dollar?
Exactly. The dollar is the cornerstone to whether we see ongoing deflationary trends or if we actually see the commodity collapse come to an end. I just cannot understand why nobody seems able to put two and two together on this one and still come to the wrong conclusions. The dollar has topped on this cycle. It is going down.
I think it is even simpler – are they, the Fed, going to raise IRs? Is the US economy in a place where IRs can be raised before 2016?
I think the answer is no and when the penny drops then the markets will move considerably – I am just trying to get my head around whether everything will go up or whether we will see conventionals up and commodities hit again.
No IR rise will signal that the economy is still weak which may well be a sign for the market to sell off commodities even more. On the other hand, no IR rise will mean a weaker USD and that should mean that commodities will rise. I suspect it will be the latter.
I think Gary has more or less said that a dollar top may be in – if certain conditions are met on the fairly short term.
Good thoughts Phil. That is the way I understood Rick to explain his scenario as well.
Rick is not worried much about the CHinese dumping gold if their US stock market investment crash. However I would be more concerned about what might happen with regard to forced selling of Chinese privately owned gold if the Chinese stock market, property market or economy crashes.
Had a thought this morning I’d like to mention. Zero Hedge had an article about the slam of PMs and ramp in the dollar. Most would assume the typical manipulation artists are active again. Question: Why isn’t this possible for the Chinese to be involved? Keeping the dollar high seems to be in their interest and cheaper gold allows them to accumulate more. Seems more probable to me that they’re involved today. JMO