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 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
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Understanding The Yuan, U.S. Dollar Relationship To Gold, Silver And Commodities

Commodities / Gold and Silver 2011 May 06, 2011 - 05:04 PM GMT

By: Jeb_Handwerger

Commodities

Best Financial Markets Analysis ArticleIn early January of 2011, a top secret candlelight dinner was held at the White House. There was no fanfare and meager publicity. Present were the industrial, military and governmental heads of both China and the United States. Our government had just digested the failures of Lehman Brothers, AIG and other corporate icons by creating massive bailouts and running up trillion dollar budgetary deficits.


China was also concerned about inflation and soaring prices due to the intentional debasement of the U.S. currency (UUP) by the Federal Reserve. Both sides reached a modus vivendi, so they could mutually profit from these agreements. Please see my article on the "Chinamese Twins" back from January 2011 to understand these past few weeks.

Since my January article highlighting the deal, the yuan has steadily risen versus the greenback. China had long wanted to enter the American financial markets. It had abundant U.S. dollars (UUP) to make acquisitions and at the same time needs to diversify out of its enormous U.S. Debt(TLT) position. The solution was simple the U.S. would deliberately weaken the U.S. Dollar in order to hope to fortify the proposed elevation of the Yuan. Consider the cleverness of these stratagems. A bolstered Yuan could allow the growing Chinese Middle Class to improve their lifestyle. In addition, China would now be able to go on a buying spree for foreign companies particularly in the area of commodities and natural resources.

With the improved Yuan (CYB) they would now be able to acquire foreign companies at more attractive prices then heretofore. An elevated Yuan would allow them entree into American Institutions and Banks. It would also allow U.S. citizens to transfer their cheap U.S. dollars into the Yuan at bank windows right here in the United States.

Remember that noises have been made establishing the Yuan as the World's Reserve Currency. The agreement to facilitate Chinese acquisitions and financial entry into the U.S. markets and thus establish a pro quid pro with the United States. Conversely America also benefits by being able to sell products at advantageous prices and to pay off our colossal trillion dollar debts with cheap dollars. Basically, this was the scheme achieved by China and the United States at that candlelight dinner.

The game-plan was conceived in Washington in early January of 2011 and delivered by Bernanke in Washington at the end of April with his grand debut in front of the media. The head of the Fed could regale his audience with phrases like interest rates, transitory inflation and other tropes.

One question remained that no one would dare to ask. If there is no concern of rising silver prices and the falling dollar then why are precious metals especially silver (SLV) soaring into new highs? Obviously the plan to devalue the dollar had seen silver, poor man's gold and a highly speculative market made up of mostly retail investors reache record heights. To combat this "bad inflation" would come not in the form of interest rate hikes to slow down the acceleration of the dollar decline but through a series of margin rate increases which would cause a temporary shakeout of speculators. Raising the costs of owning silver began a quick de leveraging of risky traders taking on too much risk at frothy level. This has sent fear throughout the commodity sector. This correction should be short lived as strong hands will come in and silver will regain its footing and find support after the washout has concluded.

I have researched natural resource assets that might prove to be attractive to the Chinese. On our list are companies some of which already have Chinese participation. Just this year alone Minmetals was outbid by Barrick (ABX) to takeover copper miner Equinox. Jinchuan is making a bid for base metal producer Lundin (LUN.TO) Mining. General Moly (GMO) has received major assistance to build North America's largest molybdenum mine in Nevada. General Moly is currently writing its feasibility study in Chinese to secure the necessary financing.

The Chinese are very willing to partake in these world class assets and are not hiding that fact. This aggressive search for strategic metals may transfer into the rare earth sector (REMX) as well. Prices are continuing to soar and hybrid car manufacturers are looking for supply over the next 3-5 years as demand is rapidly advancing for the crucial heavy rare earths used in the fuel efficient engines. Manufacturers are trying to get all the ore they can and after this runs out I expect some off take deals to occur in late 2011 with some of these key rare earth assets in North America and Europe. Let us not forget that China made an unsuccessful bid for Lynas (LYSCF) not too long ago.

We expect China to now aggressively pursue these strategic metal mining companies (REMX) as part of this little publicized arrangement between these two powerful nations which I have called the "Chinamese Twins" who are now conjoined intimately.

I invite you to partake of my members only stock analysis service for free by clicking here.

By Jeb Handwerger

http://goldstocktrades.com

© 2011 Copyright Jeb Handwerger- 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