Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Why Silver Prices Are Safe from China's Monetary Policy

Commodities / Gold and Silver 2010 Feb 17, 2010 - 05:46 AM GMT

By: Dr_Jeff_Lewis

Commodities

The Chinese have emerged as the new economic superpower, and already investors are beginning to feel the impact of Chinese monetary policy on commodity prices. 

Precious metal investors are questioning how these Chinese policy shifts will impact their holdings.  Thankfully, although a tightening of credit does have an impact on the global monetary supply, China's attempts to call back credit should have little effect on precious metals.


Silver and the Dollar

Both commodities and precious metals are tied to the value of the US dollar.  Silver has always been, and will remain for the unforeseeable future, contingent on the US dollar, as both silver and gold are anti-dollar investments.  

The relationship that commodities share with the value of the dollar has also existed through history.  Oil trades only in US dollars.  In general, the commodity trade is settled in dollars, with most currencies having very little impact on the total global pool of commodities. 

The Chinese currency has even less impact than any other currency due to the fact that it is pegged mostly to the value of the US dollar.  Thus, any changes in the amount of Chinese currency in circulation do not affect its value against silver.

The Chinese: Playing it Smart

Although the markets may have panicked from China's quick move to stifle inflation and a bubbling economy, the longer term picture looks brighter after having removed excess credit from the system.  Purging the system of excess credit, as well as tightening lending standards and requirements, steers the economy away from a bubble, ensuring that China does not experience the same deflationary pop that the US underwent during the credit crunch. 

Investors should applaud China for protecting the true physical economy, even at the cost of slowing the fastest economy in the world.  Precious metals investors should do the same, as China remains a top consumer of commodities and metals primarily for use in its growing manufacturing base. 

A Lone Duck

The European Central Bank is notorious for keeping money supply tight, but China may be considered one of the most protective of all.  Although these two banks may be keen on safer monetary policy, they're lone ducks in a world of inflation machines. 

In sharp contrast, the Federal Reserve, the central bank of the United States, has already allowed for a doubling of the money supply.  The IMF, which represents much of the international community, has borrowed billions to make available to emerging nations, most of which is funded by inflation. 

The simple fact of the matter is that a reduction in credit from one nation, which already ties its currency to the US dollar, has little, if any impact, on long term silver prices.

Invest Without Concern

History shows us that even the greatest of nations eventually succumb to the printing presses.  Whenever and wherever there is a central bank, there is inflation, and wherever there are silver investors, there are profiteers.  What we're seeing today isn't a grand shift in banking policies, just as US interest rates in the 1980's didn't continue on past Volcker.  Truly, riches are reserved for those who can interpret history and profit from inflation.

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules