A Rising Dollar Will Crush The Yuan | Seeking Alpha
This week's chart shows that the movements of gold prices are pretty Bank of China held the exchange rate fixed at yuan per dollar. Understanding The Yuan, U.S. Dollar Relationship To Gold, Silver And Commodities:: The Market Oracle. A weaker yuan puts pressure on the global economy. The gold standard served as baseline for the dollar's value, and when we were taken.
First, the international importance of the Chinese currency has been rising recently. In Januarythe yuan became the fifth most widely traded currency in the world, while in Octoberit was added to the special drawing rights basket used by the IMF.
Yuan and Gold
If such an instrument is adopted by oil exporters, the value of gold expressed in the U. However, yuan-denominated commodity contracts have been unsuccessful so far, so investors should not count on yuan dethroning the U.
Second, sharp changes in the exchange rate of the yuan can send shock waves through financial markets, having an effect on gold. As a reminder, in summer of China devalued the yuan, which pushed global equities lower. Hence, a devaluation of the renminbi would imply an appreciation of the U. However, the revaluation of the renminbi could also significantly affect the markets. This is because China purchases a lot of U. Treasuries in order to recycle its huge dollar surpluses it buys foreign currencies to maintain cheap yuan, which stimulates exports.
Higher interest rates are usually negative for the gold prices, but the safe-haven demand for the yellow metal could then increase. To sum up, despite the rising importance of the renminbi in the world, its link with gold remains rather weak. 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.
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. 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 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.
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The first is the U. The second is the exchange rate between the US dollar and the other currency used. Based on that calculation, it is then known how many Swiss Francs are needed to equal the transaction amount in US dollars. Except that the roles are reversed. The Chinese yuan would assume the U. The role of gold remains unchanged.
And so does its value.
Yuan and Gold | Sunshine Profits
Gold is original money and every other form of money is secondary. All paper currencies are substitutes for gold, and all currencies are in continual depreciation. Related; Iran Reconsiders Crypto As Sanctions Loom The only thing that changes is the relative value of the various currencies to each other.Petro-Yuan-Gold
The changing gold price is a direct reflection of the changing value in whatever substitute medium is in use at the time. Right now it is the U.