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Offline Eddie

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More On the Yuan-Gold Peg
« on: October 11, 2018, 07:46:14 AM »
POTENTIAL IMPACTS OF THE YUAN-GOLD PEG

By Craig Hemke from Sprott Money  | 02 August 2018

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Two weeks ago, we demonstrated that the yuan-dollar exchange rate is now the primary driver of global gold prices. Today, we attempt to decipher some of the important implications of this phenomenon.

So again, let’s be perfectly clear about this. Though other factors such as headlines and the dollar index can affect price on a minute-by-minute basis, the primary driver of the gold price in the summer of 2018 is the yuan-dollar exchange rate. Though the PBOC has long-maintained a “peg” in the relative valuation of the yuan versus the dollar, the past 90 days have seen a steady devaluation of this peg to the tune of nearly 8%. See below:





Over that same time period, the price of COMEX gold has fallen by more than 10%:





To make this correlation more clear, let’s plot the two together. This correlation has become extraordinarily tight over the past month, as you can see below where the CNYUSD exchange rate is displayed in candlesticks and COMEX gold is a blue line:





And when you draw it down to just the past five days, it’s quite clear that the two react almost simultaneously:





This is not a correlation searching for a cause, nor is it a simple act of “traders” reacting to a falling yuan by selling digital gold. No, in a market the size of global gold, this type of sudden and direct correlation can only be accomplished through massive interventions, the size and scope of which is only possible at the state/sovereign level. And which state/sovereign would have a direct interest in linking the dollar price of gold to the yuan? China, of course.

In the face of massive U.S. tariffs and possible currency war, China has responded by aggressively devaluing their currency versus the U.S. dollar. In order to maintain an “equilibrium” of commodity prices through this process, it’s clear that China is now aggressively intervening in the global futures markets.

Of course, the implications of this are significant, and here is the primary question to consider:

IF China is moving to systematically devalue the yuan versus the dollar, and
IF they are actively intervening in futures markets in order to keep the relative cost of commodities in yuan terms stable,
THEN why would they go to all of this trouble simply to protect against just an 8% devaluation?
With this question in mind, consider the potential impacts of a 20-30% yuan devaluation in the months ahead. Many analysts have maintained that this level of devaluation might be necessary for China after years of managing their dollar peg—and these views were long-held and expressed before Trump’s plans of taxes and tariffs came into view.

In August of 2015, the S&P 500 index fell by more than 12% in six days, following a 3.5% yuan devaluation. So far, the S&P has held up in the face of this ongoing 7.5% devaluation, but can it overcome a yuan devaluation of 20%? And what about gold? Since price is no longer driven by fundamentals such as physical supply and demand, how much farther might price fall if China attempts to rig it lower in conjunction with their continuing yuan devaluations?

These are important questions to consider regardless of whether you own physical gold, as crashing global equity markets would greatly impact interest rates and the future plans of central banks.

So, please take some time to consider the now-present link of the Chinese yuan and gold/commodity prices, in general. And then pause to reflect upon whether you are prepared for what this correlation may be foreshadowing.

https://www.theinvestorspodcast.com/blog/margin-debt-and-the-market-2/

« Last Edit: October 11, 2018, 01:48:17 PM by Eddie »
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Offline Eddie

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Re: More On the Yuan-Gold Peg
« Reply #1 on: October 11, 2018, 08:40:37 AM »
I got busy at work. I will add the charts and correct errors on this thread a bit later.
What makes the desert beautiful is that somewhere it hides a well.

Offline Eddie

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Re: More On the Yuan-Gold Peg
« Reply #2 on: October 14, 2018, 09:56:04 AM »
The Gold-Yuan peg theory says gold is range bound.

...based on the goalposts for these ranges, Gold is limited on the upside at 1387 and on the downside at 1131. It's no coincidence that the peak and trough in Gold since mid-2016 and now were 1377 and 1124, and that supports Jim's thesis that Gold is pegged in SDR terms. This means China, in coordination the IMF, is controlling Gold prices. It also means that Gold is unlikely to go higher or lower than these values unless the SDR breaks out of its range.

Now, with the dollar having come up off a bottom and started breaking down WAY sooner that it should be doing, the pressure is going to be for gold to take off. It has already rallied this last week as equites dumped, and it can be expected to test the peg.

It will be interesting to see if the PBOC manipulations (if they do exist, and the evidence is there imho) can hold.

Gold is at 1217 and change today.

I am a follower of traders who count cycles. I think it's a good way to understand the way markets move, which is always by oscillating, and never just in one direction.

Fibonacci levels for resistance and support, and an awareness of the cyclic history of whatever asset you're interested in. Those two tools are very valuable.

Right now it isn't certain that the dollar is breaking down out of its expected path, but it will be known within a short time. The 94 level on the DXY is the battle zone.



Screen Shot 2018 10 14 at 11 54 21 AM
Screen Shot 2018 10 14 at 11 54 21 AM



What makes the desert beautiful is that somewhere it hides a well.

Offline Golden Oxen

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Re: More On the Yuan-Gold Peg
« Reply #3 on: October 14, 2018, 11:12:31 AM »
The Gold-Yuan peg theory says gold is range bound.

...based on the goalposts for these ranges, Gold is limited on the upside at 1387 and on the downside at 1131. It's no coincidence that the peak and trough in Gold since mid-2016 and now were 1377 and 1124, and that supports Jim's thesis that Gold is pegged in SDR terms. This means China, in coordination the IMF, is controlling Gold prices. It also means that Gold is unlikely to go higher or lower than these values unless the SDR breaks out of its range.

Now, with the dollar having come up off a bottom and started breaking down WAY sooner that it should be doing, the pressure is going to be for gold to take off. It has already rallied this last week as equites dumped, and it can be expected to test the peg.

It will be interesting to see if the PBOC manipulations (if they do exist, and the evidence is there imho) can hold.

Gold is at 1217 and change today.

I am a follower of traders who count cycles. I think it's a good way to understand the way markets move, which is always by oscillating, and never just in one direction.

Fibonacci levels for resistance and support, and an awareness of the cyclic history of whatever asset you're interested in. Those two tools are very valuable.

Right now it isn't certain that the dollar is breaking down out of its expected path, but it will be known within a short time. The 94 level on the DXY is the battle zone.



Screen Shot 2018 10 14 at 11 54 21 AM
Screen Shot 2018 10 14 at 11 54 21 AM

Your trying hard Eddie but it's all nonsense. Trust me.

Your on the wrong thread as well.

Since you won't listen to me, it's an ego problem no doubt. Let's try someone else.

Reply posted on proper thread.  "GO's Mi Name, Gold Mi Game"   :D


                                               

Offline Eddie

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Re: More On the Yuan-Gold Peg
« Reply #4 on: October 14, 2018, 01:56:00 PM »
The Gold-Yuan peg theory says gold is range bound.

...based on the goalposts for these ranges, Gold is limited on the upside at 1387 and on the downside at 1131. It's no coincidence that the peak and trough in Gold since mid-2016 and now were 1377 and 1124, and that supports Jim's thesis that Gold is pegged in SDR terms. This means China, in coordination the IMF, is controlling Gold prices. It also means that Gold is unlikely to go higher or lower than these values unless the SDR breaks out of its range.

Now, with the dollar having come up off a bottom and started breaking down WAY sooner that it should be doing, the pressure is going to be for gold to take off. It has already rallied this last week as equites dumped, and it can be expected to test the peg.

It will be interesting to see if the PBOC manipulations (if they do exist, and the evidence is there imho) can hold.

Gold is at 1217 and change today.

I am a follower of traders who count cycles. I think it's a good way to understand the way markets move, which is always by oscillating, and never just in one direction.

Fibonacci levels for resistance and support, and an awareness of the cyclic history of whatever asset you're interested in. Those two tools are very valuable.

Right now it isn't certain that the dollar is breaking down out of its expected path, but it will be known within a short time. The 94 level on the DXY is the battle zone.



Screen Shot 2018 10 14 at 11 54 21 AM
Screen Shot 2018 10 14 at 11 54 21 AM

Your trying hard Eddie but it's all nonsense. Trust me.

Your on the wrong thread as well.

Since you won't listen to me, it's an ego problem no doubt. Let's try someone else.

Reply posted on proper thread.  "GO's Mi Name, Gold Mi Game"   :D


                                             

MY ego. LOL.

Right.

So much easier not to have to think, I suppose, than to examine evidence and try to draw reasonable conclusions.  To each his own.

Betting on gold for building wealth is a fools game. Gold is a currency, and a good one. But how it fits into our digital world is still being worked out, and that matters a great deal. Our world is in flux.

Gold is a fine asset, but the idea that a human, who only lives 70-90 years can use it to successfully save for his own future is easily disprovable. And that is my driving force with regards to saving and investing. I'd like to still be able to afford a very good cup of coffee should I live to be 90. Shiny metals don't give me a hard-on.

Saving something is always better than saving nothing. This is my first law of investing. So those who save gold are way ahead of those who spend every dollar they make and a few more, which is the American way.

But some currencies are better for some things and other currencies are better for other things. Bitcoin is an excellent currency for beating capital controls in a totalitarian state, which is why the number of Bitcoin transactions keeps growing while the asset price itself goes all over the chart. But if you only have to hold it for a day, or a week, it's not too bad.

Dollars aren't that bad to hold for the very short term, but tangible assets are better for the long term. Gold is a tangible asset. But other tangible assets have their usefulness, Like generating income on a regular basis. This is why I keep my metals holdings fairly small. If I were a rich man like you, I could afford to hold more. As it is, I need to pursue better short term strategies that actually flow cash.

Anyone who reads this can figure out whether what I write is nonsense or not. As I always like to remind you, I do not claim to be anything more than an interested regular guy who is looking out for his own interests, and occasionally sharing what I feel like are pearls that might help some other working stiff work toward financial independence.





What makes the desert beautiful is that somewhere it hides a well.

Offline RE

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Re: More On the Yuan-Gold Peg
« Reply #5 on: October 14, 2018, 02:14:06 PM »
Anyone who reads this can figure out whether what I write is nonsense or not. As I always like to remind you, I do not claim to be anything more than an interested regular guy who is looking out for his own interests, and occasionally sharing what I feel like are pearls that might help some other working stiff work toward financial independence.

Most "working stiffs" don't have enough $MONEY$ 🤑 to make any use of your advice.  Your advice is only for the very highly paid working stiffs, maybe 10% of the population at the outside.

RE
SAVE AS MANY AS YOU CAN

Offline Eddie

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Re: More On the Yuan-Gold Peg
« Reply #6 on: October 14, 2018, 02:41:15 PM »
Anyone who reads this can figure out whether what I write is nonsense or not. As I always like to remind you, I do not claim to be anything more than an interested regular guy who is looking out for his own interests, and occasionally sharing what I feel like are pearls that might help some other working stiff work toward financial independence.

Most "working stiffs" don't have enough $MONEY$ 🤑 to make any use of your advice.  Your advice is only for the very highly paid working stiffs, maybe 10% of the population at the outside.

RE

That is untrue, but I understand why you hold that cow so sacred.



It is certainly easier to make money with money once you have money, and the more money you have, the easier it gets.

That much I can agree on.

Yes, it's a rigged game. But I choose to play it and I don't need to win really big. My wealth needs are more like a scratch-off ticket win than a Powerball win. LOL.

But I started with exactly zero, and I'm at least a "paper millionaire" now, not that being a millionaire means much these days.

I have this income because I deliberately followed a path to make my life easier. I didn't fall through the hole in the outhouse and land in a pile of money. And if I were to give some young person advice now, based on what I know, I would not recommend my job as a way to acquire wealth, either.

It takes maybe 5 million to quit work and not have to worry about money. (If you have a few assets, like a nice house that requires taxes to be paid, and you want to pay health insurance, etc. I'm not talking about subsistence).

I could conceivably reach financial independence, which is the limit to my avarice. It was never my only goal in life, or even an over-riding ambition. I could have not doubt made more money by going a different route than the one I took.

I make goals for myself. If you make goals, you tend to accomplish things. If you consider making financial goals to be beneath your dignity, or some kind of con, then you probably accomplish less.




 
What makes the desert beautiful is that somewhere it hides a well.

Offline RE

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Re: More On the Yuan-Gold Peg
« Reply #7 on: October 14, 2018, 02:51:21 PM »
Anyone who reads this can figure out whether what I write is nonsense or not. As I always like to remind you, I do not claim to be anything more than an interested regular guy who is looking out for his own interests, and occasionally sharing what I feel like are pearls that might help some other working stiff work toward financial independence.

Most "working stiffs" don't have enough $MONEY$ 🤑 to make any use of your advice.  Your advice is only for the very highly paid working stiffs, maybe 10% of the population at the outside.

RE

That is untrue, but I understand why you hold that cow so sacred.



It is certainly easier to make money with money once you have money, and the more money you have, the easier it gets.

That much I can agree on.

Yes, it's a rigged game. But I choose to play it and I don't need to win really big. My wealth needs are more like a scratch-off ticket win than a Powerball win. LOL.

But I started with exactly zero, and I'm at least a "paper millionaire" now, not that being a millionaire means much these days.

I have this income because I deliberately followed a path to make my life easier. I didn't fall through the hole in the outhouse and land in a pile of money. And if I were to give some young person advice now, based on what I know, I would not recommend my job as a way to acquire wealth, either.

It takes maybe 5 million to quit work and not have to worry about money. (If you have a few assets, like a nice house that requires taxes to be paid, and you want to pay health insurance, etc. I'm not talking about subsistence).

I could conceivably reach financial independence, which is the limit to my avarice. It was never my only goal in life, or even an over-riding ambition. I could have not doubt made more money by going a different route than the one I took.

I make goals for myself. If you make goals, you tend to accomplish things. If you consider making financial goals to be beneath your dignity, or some kind of con, then you probably accomplish less.

I understand why you believe what you say, it's a self-justification you have to have.  It is quite out of touch with reality though.  I won't go further with this, you will just threaten to quit again.

RE
SAVE AS MANY AS YOU CAN

 

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