This Is What Gold Does In A Currency Crisis, China Edition
Submitted by John Rubino via DollarCollapse.com,
As China’s leaders figure out that pegging the yuan to the dollar while quintupling their debt in five years was a colossal mistake, they are, apparently, concluding that the only way out is a sudden, sharp currency devaluation. As Reuters reports...
China's central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good.
The People's Bank of China (PBOC) has spent billions of dollars buying yuan over recent months to defend the exchange rate, but has failed to stabilize market sentiment. The currency has steadily lost another 2.6 percent against the U.S. dollar even after the bank sprung a surprise devaluation of nearly 2 percent in August.
That gradual, managed depreciation makes the yuan a one-way bet for investors who see the currency weaken even as the central bank intervenes to prop it up.
Policy insiders are now calling for a quick and sharp yuan depreciation, backed by tighter capital controls to curb speculation and the flight of money out of the country.
"We should let the yuan have a considerable depreciation, but we should have a bottom line; it cannot create a big impact on the economy and the financial system, and big panic in the capital market," an influential government economist told Reuters, suggesting the yuan be allowed to depreciate by 10-15 percent over an unspecified timeframe.
Letting the yuan fall sharply and quickly could help cushion many of China's debt-laden companies as the government pursues far-reaching structural reforms. Beijing is keen to restructure industry through "supply side" reform, especially reducing industrial over-capacity, but fears the corporate sector is too weak to handle that.
[ZH:However, one needs to ask whether that is the goal for China... after all - Exports have been rising with a stronger Yuan?
Or maybe it is as we previously noted - policy...
Finally, the real purpose of the PBOC's exercise in FX management today was, just like in August, to fire a warning shot at the Fed's rate-hiking plans. Only this time the warning shot is far, far louder.
In September the Fed postponed its rate hike as a result of China's devaluation. Will it do the same again next week? Because if China is about to unleash a 15% deval of the CNY against the entire world, expect a flood of Chinese FX reserves as the PBOC tries to control the glidepath of its currency, and avoid an all out collapse driven by soaring capital outflows.
In other words, we are now right back where we were in mid-August, just before the bottom fell out of the market.]
"The biggest risk in China is not really the economy," said Qian Wang, senior Asia economist for Vanguard Investments Hong Kong. "The real risk is, number one; the policy uncertainty, and number two; the currency. China is walking on eggshells."
* * *
Chinese citizens, meanwhile, are anxiously awaiting tomorrow’s market open while mentally repeating the same three lines:
- Sure am glad I bought that gold last year.
- Wish I’d bought more gold last year.
- Wonder what I’ll have to pay for gold next week…
Here’s what that looks like in graphical form:
If China does spring a 15% devaluation on the already-wound-too-tight leveraged speculating community, the impact should be, well, amusing for sure, but otherwise a little hard to predict. About the only thing that can be said with near-certainty is that the above chart will have to be updated with much higher left and right axes.
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Im getting hard reading all the news about gold lately...
US Dollar to gold ratio will be the last to rise, keep buying the 3:30 ramp. Sarc/
Today I ordered more metal. I had the choice between 1200oz of silver and 17oz of gold. Guess which one I picked. Hope I'm right though, or the wife will be pissed.
Does she understand the idea of "insurance" vs. investment?
I buy gold and silver in case it all goes to hell. I bought house insurance for years, what a bummer. In 2011 my house was destroyed by a tree in a tornado. Had enough insurance so that I was not wiped out. Wished I had purchased a little more, but I did have savings (another kind of insurance).
In my and my husband's book, we are really glad not to lose, that is winning in this environment.
That's not what I meant. I told her what I was doing and she agreed. She just thought the gold was more valauble, and I had to talk her into the silver. So I hope I made the right choice.
My wife is on board with my nutty ideas 95% of the time, or else I would not have married her.
Cool. Lots of guys here will be jealous that you have a partner in this. Many struggle to do the right thing when she thinks she needs new stuff.
I have learned not to watch the swings too close, I have gone insane white knuckling the drops, been too high on the ups. These drops and rises are merely the deflation/inflation thesis doing what it is going to do. I hope I don't need the stuff and my kid gets it. Wish you the best.
you can't watch the swings. buying pm is like buying a CD used to be....stashing money away for way in the future. you're not day-trading it. the closest i come to that is exchanging some of the silver for gold or vice versa when the ratio gets out of whack, but i never decrease the total. (and i always get buy-in from my wife before any changes of policy....it is our future savings, not mine.)
I suggest 30-70 ounces of silver for each ounce of gold. Let the chat with the wife be to pick your family ratio until you chose later to change it.
Be happy your wife is competent enough to rise to that decision level.
30 is close to traditional ratio.
70 is close to current ratio.
I keep a spreadsheet tracking historical Au, Ag, Pt, Oil, U. Every couple months, when I'm ready to buy another tranche of long term stuff to sock away, I take a look to see what is relatively cheapest w.r.t. the others on about a 5 year averaging. Gold is the most expensive right now. Mostly buying silver and oil. Pt cheap, but with VW getting caught with their peckers in the coffee grinder, diesel sales likely to be down for awhile, and Pd works almost as well as Pt on gas engines, so not so anxious to stock up more Pt now. U been down so long not accumulating more till see what the trend does.
My wife's got gold - that, and her tits, is why I married her.
Dude.. you did it right. Always marry for boobs.. You can always learn to love the rest.. btw.. Doesn't gold appreciation happen only to the RMB if it is going down in value against USD? This RMB devaluation in and of itself will not cause gold to appreciate in USD.
If I'm reading correctly, you're buying physical uranium? I've never thought about that, please share some insight as to how you're doing it?
I've been keeping my eye out for a good way to build a physical rare earths position, but haven't had any luck finding one.
Thx ahead
Reg
Dump the wife. My experience proves that a large collection of Playboy magazines (not to mention the offerings on the internet) and a good hand beats the crap out of taking care of and shit from some self-absorbed bitch.
The chicks in Playboy are forever young, gorgeous and pure fantasy. Deal with it.
What would I eat? Who'd buy me shoes and clothes? How would I get from A to B when I'm drunk?
You can have your fabulous life of masturbation - but I need a lot more than just a hand job.
"These drops and rises are merely the deflation/inflation thesis doing what it is going to do."
That's just rubbish. You can't prove that point and I don't care if you try. I won't be listening.
Just do what you have to do. That's all here is to it.
Remember if you have to evacuate quickly, Gold holds more value for the same weight and space.
You can not carry your house with you in a hurry, but equivalent value to the said house can fit in a small bag.
Not losing is winning? Damn, that's kind of depressing. I get it though. It is getting harder here to stay even. Zero debt so we have that going for us plus that whole Dalai Lama thing. We have been planning for the future by prepping. I remember when people planned for a different future than just plain old survival.
Let her pick it, and if she doesn't conform to your druthers, snicker politely, guaranteed to rattle her. Hold tight and she will eventually do what you wanted all along. If she knows more than you, go sit in the corner, shut up, and be glad you have her on your team.
It works every time. Aw hell, you already know that.
I am wondering if China pegs the Yuan to Gold, whether the gold manipulation will stop as lower gold price helps China curency-wise and higher gold price hurts the dollar and also helps China reserve-wise.
Your thoughts mates.
I would expect China and Russia will peg at the same time.
China can't peg to gold. even with all their gold buyig over the past few years, their debt level won't allow it. They have to wipe out the debt (which would start a civil war)
I hesitate to make predictions to an oracle, but here's how I see it: when gold went from $20.67 to $35 per ounce under FDR, it created a 70% devaluation of the dollar---and dollar debts. The Chinese won't (or can't) go that far, but if they declare a certain number of yuan per ounce rather than yuan per dollar, other countries, especially those already linked to the yuan by trade agreements, will follow.
I think China bought all that physical so that they would have something other than the dollar to devalue against.
I think Gold will become a daily topic for all soon.
Gold, Silver & BTC, BTChez.
Yup, time to scalp a bitcoin long http://margintradingbitcoin.com
I don't click bitcoin links but am I to gather they are derivatizing BC now?
Correct, it is 20x bitcoin futures trading. It has been around for years, though.
Beware they make socialized losses sometimes when the market goes wild but it's very good to scalp !
BTC FTW !!! Wait that SegWig and LNs are around, it will be killer app !!!
So, with Gold in so many news reports, obviously the price in terms of US $'s will drop tonight.
In dollar terms, it might. Enjoy the discount. Other currencies are collapsing against the dollar, which means you can buy it cheaper in dollar terms.
Let's see if a right shoulder forms on the H-1 chart?
The neckline is well defined off the Thursday and Friday spikes. Around $1090.00.
What Canadians repeat...
I'm sure glad I bought gold last year
I should have bought more gold last year
I wonder how much it will cost me to buy gold next week?
Nahhh, I'm kidding...only one Canadian in a thousand says things like that.
1 in 10,000 and they are usually of Asian descent or live in Alberta.
I am an exception
But I even bought a little BTC last year (I do a lot of online payments) and it doubled its worth in C$. It's nice to have diversification (away from the C$)
You betcha! The other 999 Canadians just worry about what color tie Don Cherry will be wearing on Hockey Night in Canada and whether there is enough Molson in the fridge.
...and I am compelled to add, fuck them.
Depending on the situation Molson might be worth more than gold.
You have obviously never drank any of their pish and yeah, I downvoted you...
O'Keefe at our house. None of that Molson stuff.
My brother buys Molson Canadian and waters it in half...it turns it into Coors Light, but he has twice as much...just like the US$.
Wow, downvoted for a joke. Are there sensative alcoholics in here?
No, people who appreciate real beer. Apparently the concept is lost on you so your mileage has apparently varied...
Well I usually don't play the snob card, but no, I only drink beer from small local breweries on the rare occasion that I do drink it. And there is no lack of good beer here in Portland, Oregon.
It was a stupid joke about alcohol being more valuable than gold, and you decided to troll that stupid joke. Of course I'm taking the bait, but wow - you might want to consider getting up from your computer and doing something else for a while. Maybe play some guitar or some other outlet. Seems like you need it.
No sensitive alcoholics here, but there does appear to be a sensitive comedian.
Hey, with all the fucking experts on sodomy and ass in here, I'm sure there's many more sensitive than I.
Fuckwits, BTChez.
It appears that you're the one fixated on the rusty sheriff's badge... I guess it comes from being an ignorant, dyslexic a-Hole yourself.
Alcohol IS more valuable than gold, if you don't have enough to scrape together to buy an ounce.
Follow your own advice. You live in one of the capitals of microbrewing and you're arguing over the virtues of drinking urine?
...and you're calling me a troll?
You might want to just go get a real beer and jerk yourself off somewhere other than the internet too.
Fuckwits, BTChez
I like Molson Golden
When this is all people care about it makes it very easy for a .gov or corporation to cheat them.