Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter


Falling Silver and Strong Gold Signal Chinese Economic Slowdown

Commodities / Gold and Silver 2010 Nov 26, 2010 - 08:15 AM GMT

By: Adrian_Ash


THE PRICE OF GOLD fell hard against the US Dollar in London on Friday, unwinding the last of this week's earlier 2.1% gain as global stock markets and industrial commodities fell across the board.

The silver price dropped 3% from the start of Friday's "thin and quiet" trading in Asia, as one Hong Kong broker described it.

Gold priced in Australian Dollars hit a fresh 4-month high, however, as the "commodity currency" fell hard on the forex market.

Priced in Euros, physical gold bullion held onto this week's 3.3% jump, as Spanish government bonds bucked a rise in Greek and Irish debt, falling in price and pushing the 10-year yield to a Euro-record above comparable German Bunds.

"There's no way back from the Euro," declared German central-bank chief Axel Weber this week. A break-up of the 16-nation currency union is "inconceivable" said another senior Eurozone official on Thursday – it's "unthinkable" says a leading Washington think tank.

"You would see the European Central Bank printing €500 notes and dropping them from helicopters before Spain was forced to default," Peter Institute fellow Jacob Funk Kirkegaard said to Reuters today.

Fears of slower Chinese growth, meantime – sparked by tighter monetary policy in the world's fastest-growing economy – "could become increasingly important for the relationship between gold prices and more productive commodities such as oil or copper," says Patrick Artus' research team at French bank and London bullion dealer Natixis.

Gold bullion prices this week pushed up to equal almost 17 barrels of US crude oil – "the highest levels since the first quarter of 2009," says Natixis.

"The market is reflecting a heightened risk of an industrial slowdown."

"[The US Fed's] indulgence in Quantitative Easing might just be about to run into [Beijing's] switch to Quantitative Tightening," agrees Diapason Commodities' Sean Corrigan.

"We know which we think will carry more weight in setting commodity prices."

In China today, an auction of 3-month government debt failed to find enough bidders after Beijing raised banking reserve ratios again last week – forcing banks to keep back a larger proportion of depositors' funds.

"The demand for short-term bills is pretty weak due to tighter cash availability", reckons Guotai analyst Jiang Chao in Shanghai, speaking to Bloomberg.

So-called "quantitative tightening" – curbing the supply of credit – is preferable in fighting China's inflation to raising interest rates, says the FT's Alpha blog. Because "it avoids encouraging hot money inflows into the region," especially as zero rates and quantitative easing in the United States force capital to seek a decent return elsewhere.

But Beijing is "paying the price for this reluctance in the form of uncomfortably high inflation," warns RBC Capital Markets, risking a much sharper rise in rates when forced.

Real Chinese lending rates – after a sharp rise in inflation – now stand at barely 1%. Real returns to cash depositors are negative by more than two percentage points.

The world's No.1 gold mining producer, China is also the No.2 gold consumer, accounting for 16% of global demand in the third quarter with Chinese households doubling to nearly 2% the amount of their fast-growing annual savings they put into gold.

"I am not sure raising rates will reduce inflation at all," says Peking University professor Michael Pettis. "On the contrary, in China they may actually increase inflation [because] the vast bulk of Chinese savings is in the form of bank deposits.

"Raising the deposit rate is like reducing taxes...By raising disposable household income, it will actually raise household consumption."

By Adrian Ash

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

© 2005-2019 - 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