Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Why is China Promoting Gold Investments, If the Yuan is Going to Appreciate?

Commodities / Gold and Silver 2010 Jun 11, 2010 - 12:09 PM GMT

By: Julian_DW_Phillips

Commodities

Best Financial Markets Analysis ArticleThe Chinese government is encouraging investments in gold and is working to expand the range of gold investments there. But the U.S. and others believe that the Yuan is going to appreciate. Surely the Chinese investor will be hurt if this happens?


Chinese Gold Promotion

The Chinese government has been adding to its gold reserves, for at least six years now, we believe. Local gold production is not leaving the country, nor will it for years to come. At the same time the Chinese government favors the development of new gold investment products, has opened up gold markets and encouraged the major Chinese banks to sell gold across China.

This is a particularly important development for the global gold market in the light of the fact that per capita, the Chinese hold the least amount of gold amongst the Asian nations. The savings propensity of the average Chinese earner is remarkable, for they save around 40% of their disposable income. To date these have been held on deposit at the banks, with the more sophisticated venturing into the equity markets there. But these in times of volatile 'spikes' can behave more like gambling casinos than investment sources. Gold in the Chinese mind represents true value and leads to financial security. Consequently, the potential for gold buying in this nation of 1.4 billion people who are in a rapid process of financial empowerment is tremendous and could well, in time make China one of if not the most important investment markets for gold.

The main restraint on Chinese gold buying, whether by individuals or the government, is the small size of the global gold market. Persistent long-term buying is the only way the acquisition of large quantities of gold can be approached. Higher prices over time may well flush out sellers of gold. So we expect Chinese gold buying to remain persistent for the foreseeable future.

Will The Yuan Appreciate as the U.S. wants?

For years now the U.S. in particular has been calling for an appreciation in the Yuan. Even the I.M.F. has told them that it is in the interests of China to let the Yuan appreciate. But no heed has been taken of such demands. Yes, the inscrutable Chinese have allowed the West to get the impression that they may well let the Yuan appreciate, but a look at the advantages to China of a pegged Yuan to the $ tell us the story.

The original reason for the pegging of the Yuan to the U.S. $ was to capture the price advantage Chinese good had over the equivalent made everywhere else. As the $ is the global reserve currency, such prices were easily translated into other currencies. As we see by yesterday's export report for May from China the rise of 48% shows what advantages such pegging and pricing brings as the world slowly recovers. Yes import could be cheaper, but that would only save money not promote industry. After all China wants and needs to develop its economy.

We have been touting the future role of the Yuan as a global reserve currency for well over the last two years now. Since then we have seen the tentative steps that the Chinese need to take to ensure their banks can cope with this changed structure. Since expanding Yuan trade in just Hong Kong, it is now spread throughout the main manufacturing hub of Southern China. When they are ready, we do expect to see a flood of Yuan to all their international trading partners, to pay for imports and then to make Yuan available to pay for Chinese exports. As Chinese trade is already global, there will be a point when Chinese importers will price imports and exports in the Yuan. While this process is in transition, we also expect their pricing policies to widen to include allowing payment for Chinese exports in the broad spectrum of global currencies. This will allow China to diversify its reserves and lower its exposure to just the $ or the €.

When the internationalization of the Yuan happens there would normally be a tremendous fall in the value of the Yuan as it floods markets, but in today's context that fall would be absorbed by the pressure for the Yuan that is now being experienced. When it does happen, we believe that China will want the Yuan to either hold current levels of in fact fall.

The Gold Price in the Yuan

Having said all the above, we have to ask you if you expect the Chinese government to promote gold so strongly to its citizens, then knowingly engineer a fall in the Yuan price of gold? Our view is that the Chinese government would not wish to hurt its own like that, but with a large dose of forethought, would have blended to two policies to the benefit of its own citizens. If they didn't what would happen to Chinese gold demand.

Where will the price of gold head to in the Yuan?

Subscribers only

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2009 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 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