Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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