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Chinese Yuan is Going For Gold… Literally!

Smart Money Europe's picture




 

The Chinese yuan, or the renminbi as some like to call the Chinese
currency, is going strong again, breaking the 6.5-dollar-level over
night!

The strong move follows on the dovish speech and Q&A session of Ben Bernanke last night, which delivered no radical change of Fed policies.

So there went the dollar, dropping against most commodities and currencies, especially the Chinese yuan.

Not only Bernanke seems to spur a stronger Chinese currency, also
officials from the World Bank gave some comments on a rising Chinese
yuan.

The Wall Street Journal reports:

“If you have inflationary pressures, appreciating the
exchange rate can help you with that,” Louis Kuijs, senior economist at
the World Bank office in Beijing, said at a press briefing. “The
theoretical case and empirical evidence of the role of the exchange
rate in these kinds of matters is so overwhelming that it shouldn’t
really be an issue of debate.”

“On the inflation issue, certainly the more quickly you do it the more impact you get,” he said.

 

Recent inflationary pressures are coming from food items such as
meat, largely due to rising global prices for imported soybeans and corn
which go into animal feed, he said.

 

“So if you were to appreciate today, you would get your soybeans 10%
or 5% cheaper, you would get your corn cheaper, you could have a very
quick impact on the cost structure of some of the sectors where
inflation is the highest.”

The comments from the World Bank followed shortly after they upped their GDP forecasts for China!

Via MarketWatch:

The World Bank raised its forecasts for China’s gross
domestic product growth to 9.3% this year from 8.7% previously, and 8.7%
next year from 8.4%. The upward revision is based on the country’s
stronger-than-expected performance in the fourth quarter of last year
and the first quarter of 2011, it said.

 

China’s GDP grew 9.7% from a year earlier in the first quarter.
According to official government estimates, GDP rose by 8.7% from the
previous quarter on an annualized, seasonally adjusted basis, but the
World Bank’s own estimates of on-quarter growth are slightly higher, it
said without elaborating.

 

The international lender now forecasts that China’s consumer price
index will rise by 5.0% this year and 3.4% next year, up from its
previous forecasts of a 3.3% rise in both years.

 

Food price increases, which have been a main driver of inflation in
China, will likely slow over the next 12 months, resulting in moderating
overall inflation, the World Bank said.

Slowly but surely, the Chinese yuan is catching up on the US Dollar.
At the current pace, it’ll only be a matter of months before the yuan
breaks into new record territory!

In the meantime, gold demand in China is surging!

China experienced a 21 percent year on year rise in gold
demand  to 571.5 metric tons in 2010, according to statistics released
by the China Gold Association. Demand for gold jewelry increased better
than 5 percent to 357.1 metric tons and demand for gold coins jumped 55 percent to 16.61 metric tons.

 

China’s demand for gold bars also experienced very strong growth, rising 94 percent year on year to 141.9 metric tons,
while gold consumption by the industrial sector increased 18 percent
to  47.4 metric tons, and gold consumed for other purposes grew 15
percent.

China is ramping up its gold demand as a way to fight
against inflation amid complicated global economic environment. The
World Gold Council expects that China’s annual gold consumption will have the potential to double in the next 10 years.

Not only the people of China are scrambling for gold, also the
authorities i.e. the People's Bank of China (PBOC) is talking gold
nowadays!

Per WSJ:

PBOC Gov. Zhou Xiaochuan said last week the government is
working to reduce the accumulation of foreign-exchange reserves, which
pump excess cash into the economy and “exceed our reasonable
requirements.”

 

“There is no comprehensive or systematic solution, but the PBOC has
to think of ways to stabilize the domestic money supply, otherwise it
will lead to asset bubbles. Such a fund would be an attempt at finding a
way,” Chen Xingdong, economist at BNP Paribas, said.

 

A forex stabilization fund is generally composed of gold, forex and domestic currency, the report said.

Do we hear a ‘yuan gold standard coming up?!

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Thu, 04/28/2011 - 17:58 | 1218111 Augustus
Augustus's picture

No oil imports required.

Of course, nothing is really getting done either.

Does it also represent the China companies listed on the US exchanges?

Thu, 04/28/2011 - 17:46 | 1218048 Mesquite
Mesquite's picture

Wonder when the new US printed $ will change the Slogan: In God We Trust  to  In China We Trust..?

Thu, 04/28/2011 - 17:38 | 1218018 boricuadigm-shift
boricuadigm-shift's picture

Renmibi is the name of the currency which means "people's currency". "The primary unit of renminbi is the yuán "

http://en.wikipedia.org/wiki/Renminbi

 

 

 

Thu, 04/28/2011 - 16:57 | 1217756 speculator
speculator's picture

The dollar wil be fine. For all the crowing about an impending dollar crash since 2007, we still don't have a new low, just a trading range. The crash happened from 2000-2007. The move is played out, but as is so often the case, it's only after it is over that the crowd notices. And zerohedge is no longer fringe or contrarian on this issue, to say the least. 

Sentiment is the key here: over 85% of traders have been bearish on the buck for two months now. Everyone who is going to sell has already, and it doesn't take much to change the mood when it's this lopsided.

The mood changes fast on the dollar when we enter a phase of de-risking, since the dollar has become the biggest source of funds for the carry trade: borrow dollars, trade them for anything risky, make money. Traders scramble for the buck (and Yen) when their positions go sour, like we've seen in every sell-off since 2007.

At over $50 trillion, margin, mortgage, corporate, consumer and other private debt dwarfs the Bernank's monetary base (2.5T) and even Timmay's Treasuries (15T). They just can't print fast enough to kill the dollar when there is so much debt proping it up: it doesn't matter what you think of a currency if you owe it but don't have it - you need it bad!

Lots more on this with charts on my blog (not a business, just a hobby and trade log): http://sovereignspeculator.com

When everyone is on one side of the ship, move over to the other. 

 

 

Thu, 04/28/2011 - 17:04 | 1217812 falak pema
falak pema's picture

you certainly love being on the Titanic...good luck with the white monster...creating more debt on top of existing debt, when you don't have "a shit from shine-hole" idea of reducing new debt production as imports stay rampant...is a true formula for going from bad to worse! Print away Groucho! One day the buck will stop like the free lunch.

Thu, 04/28/2011 - 16:44 | 1217651 falak pema
falak pema's picture

The Chinese know how to play <go> not chess...appreciate the difference. They have the west on the run in reverse contango, not in total strangulation and check mate.

You are all in the same boat, contrarians and conventional US citizens : of USD sinking and not seeing that this means: your Oligarchy has two choices : war (which it will lose unless its mega nuclear) or kicking the can for sixty + years. Neither is a good option. So little Lennie- Len-a-Pe descendants of the original americans, its going to be tough to climb back on to top of the heap. Not that its impossible but it'll take a while. Meantime good luck to the contrarians  planning to be the new nation of the Guillotine; you'll need a mega ground swell in coming years! But the crazy next election shenanigans should help!

A lot of haircuts on the menu! Scalp away and cut the rot from the bean stalk. While back across the pond...they will be grappling with the euro going Fu man Chu to avoid it from singing "fuck you, fuck you very much" ...to their bankstas! But that's another story of Marco Polo's trail going backwardation. What is the world coming to! Thank heavens there is a royal marriage!

Thu, 04/28/2011 - 15:52 | 1217392 dark_star
dark_star's picture

If I have this right, to have a gold standard currency you need a store of gold in some proportion to your issued currency right.  I believe that the Chinese desire to replace the USA as global superpower and in my view they believe a backed currency (silver, gold) is a prerequiste.  So how much currency does China have issued, how much gold would they need to accumulate/store to meet market expectations on backed currency?

If the yuan is to appreciate (in line with WTF objectives), gold is traded in usd and they are trying to accumulate gold in order to back their currency they have no motive to appreciate their currency more than is politically necessary.

I've always considered the Chinese to be "up to something", but is that any more devious than the fact I agree with many here that the USA is "up to something".  By that I mean say one thing, do another.

Thu, 04/28/2011 - 14:09 | 1216963 CustomersMan
CustomersMan's picture

 

     Chalk One Up For The Good Guys

 

Iceland Declares Independence from International Banks Tags:

Iceland is free. And it will remain so, so long as her people wish to remain autonomous of the foreign domination of her would-be masters — in this case, international bankers.

On April 9, the fiercely independent people of island-nation defeated a referendum that would have bailed out the UK and the Netherlands who had covered the deposits of British and Dutch investors who had lost funds in Icesave bank in 2008.

At the time of the bank’s failure, Iceland refused to cover the losses. But the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.

In response, the Icelandic people have told Europe to go pound sand.

 

Thu, 04/28/2011 - 16:03 | 1217475 gwar5
gwar5's picture

Good one. I've been watching too. Iceland's successful rebound is a huge story and one that is not getting a lot of coverage by the MSM.  Other countries will do the same if their people become aware. I hope Ireland, Greece and Portugal follow suit. They should all stick together against the EU instead of getting picked off one at a time.

Not that some countries deserve to take their lumps.... but never at the expense of losing their sovereignty to the international banks and becoming debt slaves.

Thu, 04/28/2011 - 16:46 | 1217680 falak pema
falak pema's picture

Iceland is a pimple not a cancer for the Oligarchy. Don't take the tree for being the whole wood! They will not take that from a big domino. Watch out they are serious.

Thu, 04/28/2011 - 16:02 | 1217462 gwar5
gwar5's picture

Good one. I've been watching too. Iceland's successful rebound is a huge story and one that is not getting a lot of coverage by the MSM.  Other countries will do the same if their people become aware. I hope Ireland, Greece and Portugal follow suit. They should all stick together against the EU instead of getting picked off one at a time.

Not that some countries deserve to take their lumps.... but never at the expense of losing their sovereignty to the international banks and becoming debt slaves.

Thu, 04/28/2011 - 15:43 | 1217345 DoChenRollingBearing
DoChenRollingBearing's picture

Iceland: descendants of Vikings!

Thu, 04/28/2011 - 16:18 | 1217514 Zero Govt
Zero Govt's picture

a refreshing blast of good old honest common sense, as apposed our Western corrupt parasitical crones, is occuring in the political process in Iceland

 “Taxpayers should not be responsible for paying the debts of a private institution

....how simple, how clean, how right

Thu, 04/28/2011 - 13:09 | 1216681 CustomersMan
CustomersMan's picture

 

     In case you forgot China's Big Petrol Company yesterday stopped exports.

 

     Two days,  Two BIG Stories

Thu, 04/28/2011 - 13:06 | 1216655 CustomersMan
CustomersMan's picture

 

BREAKING NEWS:

 

Russia bans petrol exports amid shortages

 

   In case you thought China and Russia, would just "stand by" and let us gang bang Libya and take control of the Mediterranean and N. Africa, with Syria next on the list.

Thu, 04/28/2011 - 12:59 | 1216613 RockyRacoon
RockyRacoon's picture

Adjunct information on gold confiscation for those of you who may be concerned:

http://www.resourceinvestor.com/News/2011/4/Pages/Will-Governments-Confi...

On balance, a repeat of the Roosevelt confiscation seems unlikely. But there is one thing we can be certain of, and that is that the risk of silver confiscation is more remote, so perhaps that is the safer metal to own.

Thu, 04/28/2011 - 11:39 | 1216114 topcallingtroll
topcallingtroll's picture

The chinese are not stupid. The yuan will never be fixed convertible to gold, but gold can be used to manage the yuan. They are learning from the master!

Thu, 04/28/2011 - 12:30 | 1216479 disabledvet
disabledvet's picture

exactly.  "give gold to the people" so to speak by "letting them use their own wealth."  they have it via an extraoridnary real estate boom.  in the meantime "the governemnt keeps printing worthless paper" with no ill effect.  Just like the USA "as an up and comer."

Thu, 04/28/2011 - 11:31 | 1216091 GFORCE
GFORCE's picture

Lemmings.

Thu, 04/28/2011 - 11:40 | 1216145 topcallingtroll
topcallingtroll's picture

Cmon, at least make us laugh.

Thu, 04/28/2011 - 11:09 | 1215951 Drag Racer
Drag Racer's picture

USD/CHY change should not be pointed at the fed's meeting at all. Since July 1 of 2010 the Dollar has lost almost 5% to the Yuan in a steady drop. Some days with dips higher that this one.

What peg? Seems to me it went the way of the dodo 9 months ago...

Thu, 04/28/2011 - 10:23 | 1215765 Dangertime
Dangertime's picture

You know,

I do believe silver may actually go strong for one more week and could even approach $60 in that time-frame.

Thu, 04/28/2011 - 17:49 | 1218067 dogbreath
dogbreath's picture

you really don't have much credibility left here

Thu, 04/28/2011 - 16:45 | 1217696 falak pema
falak pema's picture

lol you really are covering your ass every way.

Thu, 04/28/2011 - 15:47 | 1217375 Hugh G Rection
Hugh G Rection's picture

DANGERTIME!

 

Welcome back bud.  So you think silver is on the up now? Hmmm.

 

I like your new TX gunslinger character, he's funny

Thu, 04/28/2011 - 15:42 | 1217334 DoChenRollingBearing
DoChenRollingBearing's picture

@Dangertime,

Consider becoming your own Central Bank!

fofoa.blogspot.com

Start back, say, a year and a half ago (or more), and it is long and difficult to understand his points, but he is right!

He just brought over Rick Ackerman and Charles Hugh Smith to his side!  And those two guys are respected financial bloggers!

...

If it makes you feel any better, I will be changing some of my silver (BIG run up) for gold as soon as I am back in town.

Thu, 04/28/2011 - 10:25 | 1215730 darteaus
darteaus's picture

What we're seeing with these Bernanke remarks is that the US is so weak it can't even talk tough anymore to defend the currency because if its bluff were called, it could not back it up.

He ends up speaking softly because he has no stick.

My guess is that we will look back at this moment as the point where market first began to realize the Fed can not stop a stampede.

Thu, 04/28/2011 - 12:30 | 1216466 disabledvet
disabledvet's picture

"no credibility."

Thu, 04/28/2011 - 09:55 | 1215631 cowdiddly
cowdiddly's picture

Just another one of thost chartists that come over from the stockmarket and try to apply their ideas to metal. Never works. Sorry pal I've got 4 coins that were bought after they passed Bretton Woods I paid 42 dollars for those coins which was more that my weekly salary then. I think those original 4 have served me well over the years. Ive rebalanced my allocation a little heavier that normal of late simply because I see not one alternative investment I care to invest in this environment. Stocks,Bonds,CDs? Don't make me laugh. Futhermore I do not see any major world currency without issues with the possible exception of Australia, Switzerland and maybe Singapore and Taiwan. With our Fed policys being what they are without a hint of change until maybe the next election(You actually think the Fed is going to change course this close to elections?) I am comfortable to sit tight for a long while. Sorry the market is a little tight for ya. BITE ME 

Thu, 04/28/2011 - 09:30 | 1215520 lolmao500
lolmao500's picture

They don't like silver?

Thu, 04/28/2011 - 10:00 | 1215660 DosZap
DosZap's picture

They are buying it hand over fist, and are not exporting ANY.

Thu, 04/28/2011 - 09:18 | 1215475 Mountainview
Mountainview's picture

The Middle Kingdom is coming---big!!! The final point will be Uncle Sam issuing Renmini-bonds to finance Government expenses...

Renminbi black market in lower Manhattan and US citizen tooling in sweatshop to talor shirts for the Chinese middleclass

 

Thu, 04/28/2011 - 09:13 | 1215439 monopoly
monopoly's picture

This article makes a lot of sense as does most of what we read here.

Thu, 04/28/2011 - 14:43 | 1217080 Al Gorerhythm
Al Gorerhythm's picture

Until you stumble across the inimitable ramblings of Meth Man. He is unequaled.

Thu, 04/28/2011 - 08:58 | 1215389 Pladizow
Pladizow's picture

Good Explanation as to why China is encouraging it's people to buy gold:

http://www.youtube.com/watch?v=YPXncTuwFIE

Thu, 04/28/2011 - 23:39 | 1219168 tiger7905
tiger7905's picture

Would seem China would need a lot more gold than they 'appear' to have to do the gold standard.

Latest from Martin Armstrong on passing the torch to China, he notes zero interest rates will only lead to captial hoarding, fleeing, or speculating...

http://goldandsilverlinings.com/?p=843

Thu, 04/28/2011 - 12:44 | 1216499 MarketTruth
MarketTruth's picture

Have BEEN TO CHINA RECENTLY and you can easily buy gold at many banks. In fact the banks have gold bar displays at highly trafficked areas to keep the idea of gold high on the minds of their customers. Gold bars also also available in many malls at jewelry stores and nicely decorated, far better than the lackluster visual designs you see in most other countries.

Silver is also readily available for purchase in China.

In America it is not as easy to get physical gold and silver as it is in China. Imagine if various USA banks had prominent displays of gold bars and were selling gold bars. Ah, but the privately owned Federal Reserve cental bank does not want their member banks to sell gold. Ask yourself why is that.

----------------------
"But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty.
--- Howard Buffett
(Warren Buffett's father and former U.S. Congressman)

READ MORE at: www.fame.org/PDF/buffet3.pdf
(I have no association with above link or website)

Thu, 04/28/2011 - 11:32 | 1216106 Bubbles the cat (not verified)
Bubbles the cat's picture

Yeah. Interesting video. Seems logical and just the sort of strategy China would pursue i.e. intellectual and practical merit.

Thu, 04/28/2011 - 11:04 | 1215938 darkpool2
darkpool2's picture

And wouldnt it help the Chinese goal of being a reserve currency if the starting point was a higher gold price. After all at current prices the total liquidity of the gold pool isnt really adequate for world commerce. Now the question is what is that initial value ?

Thu, 04/28/2011 - 11:03 | 1215932 darkpool2
darkpool2's picture

And wouldnt it help the Chinese goal of being a reserve currency if the starting point was a higher gold price. After all at current prices the total liquidity of the gold pool isnt really adequate for world commerce. Now the question is what is that initial value ?

Thu, 04/28/2011 - 10:43 | 1215824 rufusbird
rufusbird's picture

 Thanks, well worth the watch...

Thu, 04/28/2011 - 09:32 | 1215521 stewie
stewie's picture

This video is really good.  

Thu, 04/28/2011 - 08:48 | 1215346 bonddude
bonddude's picture

I love this story. You don't need the rest of the world. Just back your own currency with gold 

and those who want to remain "reserve currency" must follow. Strap in tight.

Thu, 04/28/2011 - 14:10 | 1216956 BobPaulson
BobPaulson's picture

I don't see that much discipline materializing that soon. The Chinese political machine has a scant population of free market libertarians quite frankly. They'll only do it as an act of aggression, not out of some philosophical statement about sound currency policy.

 

Thu, 04/28/2011 - 08:22 | 1215250 stewie
stewie's picture

Ben's currency chicken game is working.  Yuan Gold Standard?  Smart Money Europe with dumb ideas.  

Thu, 04/28/2011 - 10:13 | 1215709 DonutBoy
DonutBoy's picture

Yes it is.  When he gets what he's asking for it'll get really ugly.

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