Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Sun is Rising in the East, The Asian Century

Stock-Markets / Asian Economies Mar 13, 2012 - 04:19 AM GMT

By: Chad_Bennis

Stock-Markets

Best Financial Markets Analysis ArticleCheck out what Australia’s largest exchange operator(ASX) had to say about the Asian century.

“Australia will only truly advance its long-term position in the Asian region and fully participate in the Asian century by developing deeper partnerships and true integration with the region.”


Australia is hungry to participate in the Asian century.  Money is flowing eastward.  Don’t be the guy with paper fiat certificates when the buying of dollars begins to dry up.  Money has been moving east for an entire decade. True asset prices have risen while the price of cash has weakened.  Holding US dollars is a trading position.  By holding US dollars you are taking a long dollar trade, a buyer of the dollar.

Steve Goldstein goes on to say, “The currency war – a term coined by Brazilian Finance Minister Guido Mantega – is set to enter a new phase, according to Societe Generale strategist and uber-bear Albert Edwards, as governments try to boost competitiveness by lowering their exchange rate.”

The currency war is set to enter a new phase.  The foundation is already set and that is QE to infinity.  As governments around the world lower their exchange rates it will cause a chain reaction in which all countries involved in trade will need to weaken their own currency to bring it into a ratio of exchange that is acceptable to their perceived valuation.

Then there is this headline:

China’s yuan set for more international role

The Chinese currency rose 4.3% against the dollar in 2011, and is up about 23% since China first ended its formal currency peg to the U.S. currency in July 2005.

China is also doing this:

China to make yuan loans to Bric nations: FT

This shows that China is entering the bond market and emerging economies are going to be their customers making China’s yuan a more versatile and widespread currency in today’s currency war.

China is making moves to use their own currency for trade thus taking the largest player of the long dollar trade out of the market.  China is a seller into strength when the dollar rallies taking the bear trade.   Take a look at the range the US dollar has traded since 2004.  That’s eight years long.  The dollar trade from the long side looks like this for the past 8 years:

The chart above went no where for eight long years.(Although, if one were savvy enough there is quite a range to trade.)

As the US dollar trades in a range another story unfolds rather quietly over the last eight years.  Against all odds and naysayers gold has surged higher and higher.  In a clear, definite and steepening uptrend gold continues to find buyers.

Gold is behaving as a strong currency in the new phase of the currency war mentioned above.  Gold as a defensive position in this new phase of the currency war reflects the banks attempts to collectively boost their competitiveness by lowering interest rates.  The central banks weaken their currency by selling dollars on the rallies while gold is continuously met with buying.  Gold is the currency of strength as it continues to make new highs in this decade long trend.  This strength will continue to move upwards in gold until the central banks end this war of easy money.

Then we have these headlines:

China’s central bank bought gold in late 2011-report

Swiss central bank posts higher-than-expected profit on gold gains and foreign currency

The same banks that are trying to weaken their interest rates to remain competitive in trade are making money off the gold trade.

The world economy is supported by cheap continuous fiat currency.  Its akin to running on the treadmill, when the treadmill of easy money stops the economy stops.  The central banks want the economy to run so they feed the treadmill with cheap dollars.  This fact is why the banks will continue to print their way out of trouble and into a seemingly never ending economic expansion.

In conclusion, until central banks around the world begin to increase their interest rates and curb the flow of cheap fiat money into the world’s financial markets the long gold trade will continue to prosper.

CA Bennis
www.wheatcorncattlepigs.com

© 2012 Copyright CA Bennis - 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