Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20

Market Oracle FREE Newsletter


Whats behind the Euphoria in Asian Stock Markets and Gold?

Stock-Markets / China Economy Apr 24, 2007 - 06:38 PM GMT

By: Gary_Dorsch


For a few tumultuous hours on April 19th, it seemed like deja ‘vu all over again. Global commodity and stock market operators held their collective breathe, as the Shanghai Stock Index tumbled as much as 7.2% to the 3,400 level, reviving fears of yet another gut wrenching global shake-out. Beijing had delayed the release of two key economic statistics until after the close of trading, heightening fears of bearish news that could derail the Shanghai freight train.

After the close of trading, Beijing said consumer inflation had hit 3.3% in March, its highest in more than two years, and far above 2.7% in February. China's economy is overheating, expanding at an 11.1% annualized clip in Q'1, and factory output is 18.5% higher from a year ago. The news of above target inflation, jolted China's 5-year bond yields upward by 50 basis points to 5.25%, to its highest in two years, on fears the People's Bank of China (PBoC) might actually tighten liquidity.

And what happens in Shanghai is of great interest to global commodity and stock market operators, because China is the locomotive of global economic growth, and its staggering factory output is matched by its demand for industrial commodities. China's share of global demand growth for commodities between 2002 and 2005 was: 51% for copper, 48% for aluminum, 87% for nickel, 54% for steel, 86% for tin, 113% for zinc, and 30% for crude oil.

The PBoC began its pseudo tightening campaign to absorb billions of dollars of excess funds pouring into Shanghai's money markets from its ballooning trade surplus, foreign direct investment, and hot money flows into yuan denominated securities. But traders weren't fooled by the psuedo tightening. Bond yields stayed near historically low levels, and the stock market tripled, because the central bank focused mostly on soaking up excess liquidity rather than raising interest rates.

Chinese Traders take Government Threats in Stride

What briefly spooked the markets on April 19th was the idea that this pattern might change. The last PBoC rate hike in March left the benchmark one-year deposit rate at 2.79 percent. That means real deposit rates, when compared to a 3.3% inflation rate are negative 61 basis points, which encourages a flood of hot money into China's frothy stock and real estate markets, which authorities say they want to prevent.

Chinese Premier Wen Jiabao said on April 19th, that Beijing needed to take pre-emptive steps to prevent the economy from overheating in the face of excessive credit and money growth. "We need to prevent the economy from shifting from relatively fast growth to a state of overheating and to prevent big ups and downs. We will work hard to keep basic stability in the overall level of prices," he said.

But Jiaboa has a major credibility problem. Over the past four years, the Chinese premier has vowed at least a dozen times to rein in the explosive growth of the M2 money supply, and to slow the economy towards 8-9% growth. But each year, Beijing fails to deliver. Instead, it inflates the M2 money supply at an average 18% clip, to keep the yuan undervalued and expand its economy at a 10% rate.

The net result was a $232 billion trade surplus with the United States last year, and the loss of 3.2 million US manufacturing jobs, since the Bush administration took office. On the flip side, Chinese retail sales in Jan-Feb were 14.7% higher than a year ago, and industrial and bank profits are surging to record highs. Chinese exports soared to a record $252 billion in the first quarter, up 27.8%, while imports rose to $205.7 billion, up 18.2% from the same period a year earlier.

China and India's enormous appetite for raw materials have lifted global freight costs for dry commodities to record highs, with congestion at Australian coal and mineral ports at a record 20-days. The Baltic Exchange's Cape-Size Freight Index, an indicator of global minerals demand, added 190 points to 8,795 on April 23rd, within easy reach of the December 2004 record of 8,911. India's industrial output was 11% higher in March from a year ago, accounting for 25% of its economic activity.

Clandestine Agreement between US Treasury and Beijing

In return for free and unfettered access to the US consumer market, China recycles much of its trade surplus into US Treasury, agency, and corporate bonds, helping to keeping US mortgage rate 100 basis points lower than otherwise. China's holdings of US Treasuries climbed to $416 billion.

The Bush Administration has allowed the United States to become increasingly dependent on foreigners to finance the federal budget deficit, and future US national income will be depressed by interest payments to foreign holders of US debt.

Beijing also owns more than $300 billion in US agency and corporate bonds, but suffers a loss on its massive portfolio, every time it allows the US dollar to trade lower against the yuan. Since Beijing unhinged the dollar /yuan peg in July 2005, the US Treasury 10-year Note has declined by 10.6% against the Chinese yuan.

China's reserves have ballooned in recent years as the central bank, in order to hold down the yuan, has bought most of the dollars generated by a growing trade surplus, inflows of foreign direct investment and speculative capital. The central bank said on April 12th, that it FX reserves mushroomed by $135.7 billion to $1.2 trillion between January and March, more than half the $247.3 billion reserves accumulation for the whole of 2006. About 70% of China's FX reserves are held in US bonds.

But while Beijing's has steered towards safe and stable investments, Chinese leaders might start to diversify the hoard into commodities or non-US dollar currencies. China might decide to dump some of its US dollar holdings, setting off a tidal wave of T-bond sales and imperiling the US economy. Instead, Beijing might buy oil fields, copper mines or even agricultural land to help sustain the country's development. US Treasury chief Henry Paulson played down such concerns, noting that China's $416 billion of Treasuries are less than the value of an average day's trading.

"US credit markets should be able to absorb without great difficulty any shift of foreign allocations," wrote Federal Reserve chief Ben Bernanke in a letter to Sen. Richard Shelby, on March 16th. "And even if such a shift were to put undesired upward pressure on US interest rates, the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals," Bernanke said.

Thus, Bernanke indicates he's prepared to print US dollars to buy back the debt that is sold to China. The net result of such actions could be the collapse of the US dollar on foreign exchange markets, higher gold prices, and spiraling inflation in the United States. The trigger for Chinese sales of US bonds could be "veto proof" protectionist legislation by the US Congress, aimed at Chinese imports.

Two leading US Senate critics of China's cheap yuan policy said on March 28th, they expected Congress to pass a "veto-proof" bill forcing Beijing to raise the value of the yuan against the dollar. "Well-crafted legislation, WTO-compliant and strong and effective is likely to pass with a veto-proof margin during this Congress," said Sen. Charles Schumer, a New York Democrat. "That's the message I hope the Chinese and the Bush administration take away from this hearing."

The US Business & Industry Council, which represents small and mid-size US manufacturers, has attacked the Bush administration's empty rhetoric about the need for a stronger yuan, calling it "chit-chat diplomacy and a complete sham."

But on April 22nd, Wu Xiaolian, deputy governor of the People's Bank of China, rejected calls for a quicker increase in the flexibility of the yuan's exchange rate.

At current growth rates, China's economy would surpass the US in 25-years. But Chinese leaders worry that stiff US tariffs on Chinese imports could derail the world's fastest growing economy, and burst the Shanghai stock market bubble. When push comes to shove with "veto proof" trade legislation in the second half of this year, Beijing would probably relent and allow the yuan to climb higher at a faster rate.

But until the political posturing turns into action, the Shanghai bubble could try to match the last great Asian stock market bubble – the Nikkei-225 of 1986-89. Chinese retail investors opened more than one million new trading accounts during the third week of April, bringing the total for the first four months of 2007 to more than 10 million. This figure is greater than that of the previous four years combined, even as signs of a bubble are getting clearer by the day. The Shanghai stock index has risen 50% so far this year, after tacking on a 130% gain in 2006.

Chinese broker, Citic Securities, has tripled in value since early November, and is a good barometer of speculative sentiment in China. Citic Securities, Shanghai's first listed broker, said its net profit in the first quarter of 2007 rose more than 12 times from the same period a year earlier. Revenue for the three months ended March 31st, was close to that for all of 2006.

Speculative fever is running very high in China, and it's not wise to stand in the way of an Asian stampede. The Shanghai Securities News said the number of new brokerage accounts established in a single day hit a record 282,000 on April 19th, the day of the market's 7.2% plunge, bringing total accounts to over 90 million. This is a strong signal that market setbacks are not scaring Chinese traders away.

And another PBoC interest rate hike might not scare speculators, because it would only adjust real interest rates from being sharply negative. Traders do not expect a sudden jump by the Chinese yuan, and believe authorities will hold appreciation for the rest of the year to around 3% to avoid hurting China's export sector.

Bank of Korea Takes aim at "Yen Carry" Traders

While China is the engine of global economic growth, Tokyo is the ultimate source of inflation in global commodity and stock markets. The infamous "yen carry" trade, which involves borrowing in low yielding Japanese yen at less than 1% to invest in risky commodity and stock markets, is on the Bank of Korea's (BoK) radar screen. On April 23rd, the BoK warned that "yen carry" traders are inflating its asset markets, and pushing the Korean won to uncomfortably high levels against the yen.

But even as the Korean Kospi Index hit an all-time high of 1,554 points, the Bank of Korea understands that much of the impressive gains are linked to leveraged bets, financed with loans denominated in low yielding Japanese yen. Koreans borrowed $47.7 billion in foreign currencies last year, for a total $113.6 billion of outstanding debt, up 72% from a year earlier. Yen loans are also used to finance purchases of Korean real estate, and local home prices are up 11.6% from a year ago.

While the BoK is not revealing the composition of the foreign currency borrowing, it's safe to assume that the Japanese yen is at the top of the list. So far this year, foreigners have bought a net 2.9 trillion won in stocks as of April 22, including purchases financed in Japanese yen. But on April 20th, Seoul indicated it would take aim against "yen carry" traders, thru direct FX intervention.

South Korean T-bond prices extended their recent losses, lifting 5-year yields to as high as 5.10%, their highest in 11 weeks, when Seoul said it will sell 3.5 trillion of foreign currency stabilization bonds, using the proceeds for ammunition against "yen carry" traders. Seoul plans to dump the 3.5 trillion Korean won on the foreign exchange market, to slow the rise of the won against the yen and US dollar.

Nearly 40% of Korea's economy is linked to exports, with China and the United States taking a combined two-fifths of the total. Electronics and autos account for about 45% of Korea's exports, and chip exports account for 10 percent. Because exports to the US have stagnated over the past three years, sales to China which reached $6.4 billion last month have become the key driver for the Kospi.

Somehow, South Korea's total exports grew to a record $30.6 billion in March, up 14% from a year earlier, despite the won's unrelenting strength against the dollar and yen. But South Korean exporters compete with their Japanese counterparts in key markets for similar products, so Seoul is worried that the "yen carry" trade could eventually put Kospi exporters at a big disadvantage.

Still, it's going to be difficult to knock the Korean won lower against the yen, unless the Bank of Japan lifts its interest rates. The won enjoys a hefty interest rate advantage of 433 basis points above similar deposits for the yen. Furthermore, the BoK is under pressure to lift its overnight loan rate to 4.75%, with Korea's M3 money supply exploding at an 11.3% annual rate, and home price inflation spiraling at 11.6%, in Asia's third largest economy.

In order to discourage a further rally in the won against the yen, the BoK decided to keep its powder dry on April 12th, leaving its overnight loan rate unchanged at 4.50%. Thus, the Bank of Japan's super-easy money policy is exporting inflation to South Korea, by keeping the yen weak and preventing the BoK from hiking its loan rates. Without a further tightening in BoK policy to contain the money supply, Korean stock and real estate markets are expected to remain frothy in the near future.

Australian Traders Tracking the Aussie /yen Exchange Rate

The "yen carry" trade has permeated into all corners of the globe, and is especially attracted to higher yielding currencies, like the Aussie dollar. It's been a wild rollercoaster ride, but Australia's Stock Exchange (ASX-200) Index has been catapulted to astronomical heights, in large part, due to the endless flow of cheap capital from Tokyo. The Aussie dollar climbed 50% against the yen from its lows in 2001, but found resistance at the psychological 100-yen last week.

The Aussie dollar also reached 84 US-cents, its highest in 17-years, helped by speculation the Reserve Bank of Australia (RBA) would raise its lending rate by a quarter-point from a six-year high of 6.25 percent. Last month, the RBA passed up a chance to lift its loan rate to 6.50%, despite explosive growth of the Australian M3 money supply, which is accelerating at a 14.3% clip, its fastest in 17-years.

Much like the Bank of Korea, the RBA is reluctant to raise interest rates further, to prevent the Aussie dollar from climbing above 100-yen. Japan is Australia's largest trading partner, and Australian Treasurer Peter Costello is trying to talk down the Aussie dollar to help local exporters. Earlier today, the Australian government provided the central bank with at least three months of breathing space, by conjuring-up a surprisingly low +0.1% inflation rate in the first quarter.

That translates into a 2.4% annual inflation from +3.3% in Q'4, and is now within the RBA's 1% to 3% target range for the first time in 12-months, taking pressure off the central bank for an immediate rate hike. The government's fuzzy math showed a 34% plunge in fruit prices offseting a 13.3% spike in pharmaceutical costs, a 7.1% increase in school tuition fees, and higher home rents which climbed 1.4 percent. The drop in fruit prices was led by a whopping 73% plunge in banana prices.

But while government apparatchniks were lowering the consumer inflation statistics, the central bank admitted in February that the Aussie M3 money supply is out of control, expanding at an explosive 14.3% annualized rate, it's fastest in 17-years. That had led to expectations of an RBA rate hike to 6.50% in April or May to rein-in M3. But the Aussie dollar's strength against the yen, handcuffed the RBA.

The RBA had been gradually lifting its overnight loan rate for the past five years, from as low as 4.00% in Q'1, 2002 to as high as 6.25% in November 2006. But the RBA's slow-motion baby-step rate hikes didn't contain the run-away M3 money supply. Neither did the RBA slow down bank loan demand, which is 13.2% higher from a year ago. Without a further tightening in RBA monetary policy, inflation pressures in the Aussie gold market could continue to simmer at the boiling point.

Last year, the RBA intervened on a regular basis in the foreign exchange market, by selling A$3.6 billion, anxious to hold the Aussie dollar below the psychological 80 US-cents level. But "yen carry" traders and the Federal Reserve's shift from a tightening bias to a neutral bias on March 21st, overwhelmed the RBA's intervention efforts.

The stronger Aussie dollar against the deficit ridden US dollar and the ultra-low yielding Japanese yen, persuaded the RBA to keep its powder dry at 6.25% on April 3rd. But Sydney gold traders aren't swayed by the government's fuzzy math on inflation, and instead, are watching the growth of the M3 money supply.

Gold ended 0.8% higher in Sydney to A$634 /oz, following the surprisingly low inflation data, tracking a 14-basis point surge in Australian T-bill futures, which lowered the implied yield for June to 6.42%. The inflation report was a shocker for Sydney T-bill futures traders, leaving a huge gap on the daily charts, while scaling back expectations of an RBA rate hike to the fourth quarter.

Treasury chief Costello said Australian inflation hit a peak in the middle of last year and appears to have decelerated. "The headline inflation rate will go lower. You will see a headline rate next quarter below 2 per cent," he declared. Ironically, with the RBA handcuffed on rate hikes by the Treasury chief, Sydney gold traders have a green light to bid the yellow metal higher in the weeks ahead.

Ordinarily, sharply lower interest rates would be construed as bullish for blue-chip stocks. But the ASX-200 ended 20-points lower after the benign CPI report, because "yen carry" traders unwound long positions in Aussie stocks, while the Aussie dollar came under selling pressure vs the yen. The ASX-200 Index is in the hands of "yen carry" traders, and the psychological 100-yen level for the Aussie$, proved to be a barrier for the ASX-200 Index at the 6,250-level, an all-time high.

With so much riding on the Aussie /yen exchange rate, it's interesting to note, that the interest rate differential between the six-month Aussie Libor and the Japanese yen Libor shrank to +560 basis points from +588 basis points after the release of the CPI data. Still, the Aussie dollar retains a wide interest rate advantage over the yen, and carry traders could look to buy the commodity currency again at the next support level. The next Bank of Japan rate hike to 0.75% is not expected until June.

Tokyo Gold Bubbling at 26-year high

In Tokyo, the big story is not about the Nikkei-225 index, but rather the gold market. With the Japanese yen hovering at a 21-year low against a basket of foreign currencies of its top trading partners, it's not surprising that Tokyo gold prices are bubbling at a 26-year high. On March 26th, Bank of Japan chief Toshihiko Fukui warned, "there could be side effects if interest rates are kept low for too long. But for now, the BOJ will maintain easy monetary conditions ensuing from very low interest rates while monitoring economic and price conditions," Fukui added.

Four days later, Tokyo financial warlords handcuffed the BoJ from raising interest rates in Q'2, with a report that consumer prices were -0.2% lower in February from a year earlier, suggesting that the world's second largest economy had slipped back into deflation. But Tokyo gold traders were not duped by the doctored inflation data, and bid the yellow metal 5% higher to 82,000-yen /oz.

The BoJ's Atsushi Mizuno, the lone hawk at the central bank warned, "A policy of yen weakness and may increase protectionism among Japan's trading partners, and cause distortions in global asset prices by speeding up capital outflows from Japan," he said. Most likely, the "yen carry" trade and the Shanghai bubble will greatly influence trends in global currency, commodity, and stock markets this year.

The possible unwinding of the "yen carry" trade makes the Asian and European stock markets skittish. But what's behind the unrelenting strength of the Dow Jones Industrials? Which global markets are most impacted by the Shanghai bubble? What's the outlook for the "Commodity Super Cycle?" These questions and much more were answered in the April editions of Global Money Trends, published each Friday mornings, for a total of 44 issues per year!


By Gary Dorsch, Editor, Global Money Trends newsletter

Global Money Trends is now published weekly on Friday mornings ( 44 issues per year ). Here's what you will receive with a subscription,

Insightful analysis and predictions for the (1) top dozen stock markets around the world, Exchange Traded Funds, and US home-builder indexes (2) Commodities such as crude oil, copper, gold, silver, the DJ Commodity Index, and gold mining and oil company indexes (3) Foreign currencies such as, the Australian dollar, British pound, Euro, Japanese yen, and Canadian dollar (4) Libor interest rates, global bond markets and central bank monetary policies, (5) Central banker "Jawboning" and Intervention techniques that move markets.

GMT filters important news and information into (1) bullet-point, easy to understand analysis, (2) featuring "Inter-Market Technical Analysis" that visually displays the dynamic inter-relationships between foreign currencies, commodities, interest rates and the stock markets from a dozen key countries around the world. Also included are (3) charts of key economic statistics of foreign countries that move markets.

A subscription to Global Money Trends is offered at a special price of only $135 per year for “44 weekly issues”, including access to all back issues. Click on the following hyperlink, to order now,  Call toll free from USA to order, Sunday thru Thursday, 2 am to 4 pm EST, at 866-576-7872.

Mr Dorsch worked on the trading floor of the Chicago Mercantile Exchange for nine years as the chief Financial Futures Analyst for three clearing firms, Oppenheimer Rouse Futures Inc, GH Miller and Company, and a commodity fund at the LNS Financial Group.

As a transactional broker for Charles Schwab's Global Investment Services department, Mr Dorsch handled thousands of customer trades in 45 stock exchanges around the world, including Australia, Canada, Japan, Hong Kong, the Euro zone, London, Toronto, South Africa, Mexico, and New Zealand, and Canadian oil trusts, ADR's and Exchange Traded Funds.

He wrote a weekly newsletter from 2000 thru September 2005 called, "Foreign Currency Trends" for Charles Schwab's Global Investment department, featuring inter-market technical analysis, to understand the dynamic inter-relationships between the foreign exchange, global bond and stock markets, and key industrial commodities.

Copyright © 2005-2007 SirChartsAlot, Inc. All rights reserved.

Disclaimer:'s analysis and insights are based upon data gathered by it from various sources believed to be reliable, complete and accurate. However, no guarantee is made by as to the reliability, completeness and accuracy of the data so analyzed. is in the business of gathering information, analyzing it and disseminating the analysis for informational and educational purposes only. attempts to analyze trends, not make recommendations. All statements and expressions are the opinion of and are not meant to be investment advice or solicitation or recommendation to establish market positions. Our opinions are subject to change without notice. strongly advises readers to conduct thorough research relevant to decisions and verify facts from various independent sources.

© 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