He explains that due to high level of debts and current policies, currency debasements are inevitable and forecasts a complete breakdown of the current monetary system in the US, in Europe, in Japan and possibly in China. This will likely lead to Gold and Silver prices higher than the most bullish forecasts.
Showing posts with label china. Show all posts
Showing posts with label china. Show all posts
Monday, March 19, 2012
John Embry: Global Debt Saturation Ensures Much Higher Gold & Silver Prices
Presentation by John Embry, Chief Investment Strategist at Sprott Asset Management, at the 2012 California Resource Investment Conference.
He explains that due to high level of debts and current policies, currency debasements are inevitable and forecasts a complete breakdown of the current monetary system in the US, in Europe, in Japan and possibly in China. This will likely lead to Gold and Silver prices higher than the most bullish forecasts.
He explains that due to high level of debts and current policies, currency debasements are inevitable and forecasts a complete breakdown of the current monetary system in the US, in Europe, in Japan and possibly in China. This will likely lead to Gold and Silver prices higher than the most bullish forecasts.
Monday, February 27, 2012
Jim Rogers: Don't Sell Your RMB, Buy Silver Rather than Gold
Jim Rogers Interview on CNBC on the 17th of February.
He talks about currencies and commodities. He said you should buy RMB (Chinese Yuan) as often as you can, even through it's not really straightforward because it is a blocked currency.
He also told the hosts that he's very bullish on Agriculture commodities (as usual), and criticized government statistics.
Finally, when asked about Gold and Silver, he explained he would rather buy Silver than Gold beause it is still under its all-time high.
He talks about currencies and commodities. He said you should buy RMB (Chinese Yuan) as often as you can, even through it's not really straightforward because it is a blocked currency.
He also told the hosts that he's very bullish on Agriculture commodities (as usual), and criticized government statistics.
Finally, when asked about Gold and Silver, he explained he would rather buy Silver than Gold beause it is still under its all-time high.
Wednesday, October 19, 2011
U.S. Dollar and Euro - Review and Outlook
Axel Merk & Kieran Osborne, CFA, Merk Funds have just published their outlook for the US dollar, the Euro, the Chinese RMB and several other currencies.
They have a bearish view on the US dollar:
The full outlook is available at http://www.merkfunds.com/merk-perspective/insights/2011-10-19.html
They have a bearish view on the US dollar:
Policy makers in Washington didn’t help appease market concerns: leaving the decision to raise the Government’s debt ceiling to the last minute only exacerbated market fears of a U.S. default and further degraded investor’s view of policy makers; ...Standard & Poors subsequently downgraded the credit rating of the U.S. government, citing the inability of the political leadership to come together and agree on a plan to sustainably rein in the deficit over the long term as a key reason for downgrade. We consider these developments have further eroded the safe haven and reserve currency status the U.S. dollar has held for so long, and continue to view the outlook for the U.S. dollar negatively over the medium to long term.even if in the short term there are risk, they are bullish on the Euro in the medium to long term:
...
minutes from the FOMC meeting show there was support for further expansionary monetary policy, or quantitative easing, which would constitute “QE3”. It is our assessment that the likelihood of the Fed instigating QE3 has risen significantly, in part due to the weakening economic outlook, but also because of the composition of voting members next year. All three dissenting voices will be replaced in 2012 and the average monetary policy stance of voting members will become much more dovish (only one voting member is considered a hawk – Jeffrey Lacker, the Richmond President)1. With inflation expectations declining, we consider Fed Chairman Bernanke may again present the need for further easing, arguing deflationary risks have become elevated, or at the very least, that further easing will not generate significant inflationary pressures. We believe the impending FOMC composition may consider this argument compelling, and is likely to err on the side of overstimulation. All of which leads us to believe that the outlook for the U.S. dollar remains to the downside.
Europe certainly has problems, but in an odd way, it is the inflexibility of its political make-up that may lead to a stronger euro over the foreseeable future. ...Finally, they mention they still have a positive view of the Chinese Yuan:
Many individual countries find themselves with very weak political leadership, but interestingly, have instigated, in many cases, very strict austerity measures with opposition support. The issues facing the Eurozone are significant, and there is no simple, easy solution; it’s likely to be a drawn out process rectifying years of malinvestment brought about by unconscionably low funding rates for periphery nations (Greece could borrow at rates similar to Germany for years leading up to the crisis). In turn, economic growth may be restrained over the foreseeable future. Note, however, that economic growth is not necessarily a precondition for a strong currency; it is not incompatible to have poor economic growth on the back of a strong currency – just look at Japan.
...
We believe two key reasons have contributed to Japanese yen strength – weak leadership and a current account surplus.
...
On the above two factors, the Eurozone is not so dissimilar to Japan: the Eurozone has a broadly balanced current account, fiscal union is disjointed at best, and many individual nations have very weak political leadership. Furthermore, the ECB has a sole mandate of price stability, and is reticent to provide any direct bailout funding or directed asset purchases to the financial industry, or specific sovereigns, for fear of overstepping its bounds (or being taken to court by the Germans).
...
As a result, we consider the euro can appreciate on the backdrop of weaker economic growth and continued divergence in monetary policies
We continue to see upside potential in the Chinese renminbi and believe policy makers will continue to be incentivized to allow the currency to appreciate to tackle domestic inflationary pressures.
The full outlook is available at http://www.merkfunds.com/merk-perspective/insights/2011-10-19.html
Sunday, September 4, 2011
China purchases Gold to undermine the US Dollar
Zero Hedge has reported on one of the recent Wikileaks cables where China explains its view on Gold in that it helps it undermine the role of the US dollar as the reserve currency and would help internationalizing the RMB .
So now let's assume that China bring the level of its gold reserve to the same levels as developed countries.
As you can see from the Wikipedia table above, as of December 2010, China only had 1.7% of its foreign currency reserve in Gold, and to reach the level developed countries this would have to reach around 60 to 70 %. Let's say China forex reserves are now 3 trillions USD, it would need 2 trillions USD worth of Gold. At today's price (1880 USD per ounce ~ 66,000 USD per kilogram), it would represent around 30,300 tons of gold. To put that in perpective, a total of 165,000 tons of gold have been mined in human history, the total amount of Gold the USA hold is 8133,5 and the amount of Gold helf by the SPDR Gold Shares ETF is 1239 (May 2011).
So the Gold price would have to go much higher if China decided to convert 2/3 of it forex reserves. This would be a process taking several years (or maybe decades) , and China would finally need to hold less than 30,300 tons of Gold, as the Gold price would go up.
If the US, Europe, Japan or Great Britain experience massive inflation or even hyperinflation, the Gold reserve required by China to reach 2/3 of forex reserves would also decrease.
One last point, that is not directly related to China: Pension funds in the US currently hold around 0.3% of their assets in Gold bullion and gold mining shares whereas the historical norm during between 1960 and 1980 was around 5% and it went to 20% during the Gold bubble in 1980.
3. CHINA'S GOLD RESERVES
"China increases its gold reserves in order to kill two birds with one stone"
"The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."
So now let's assume that China bring the level of its gold reserve to the same levels as developed countries.
Rank | Country/Organization | Gold
(tonnes) | Gold's share
of national forex reserves (%)[10] |
|---|---|---|---|
| - |  Eurozone | 10,792.6 | 60.7% |
| 1 |  USA | 8,133.5 | 74.7% |
| 2 |  Germany | 3,401.0 | 71.7% |
| 3 | IMF | 2,846.7 | - |
| 4 |  Italy | 2,451.8 | 71.4% |
| 5 |  France | 2,435.4 | 66.1% |
| 6 |  China | 1,054.1 | 1.7% |
As you can see from the Wikipedia table above, as of December 2010, China only had 1.7% of its foreign currency reserve in Gold, and to reach the level developed countries this would have to reach around 60 to 70 %. Let's say China forex reserves are now 3 trillions USD, it would need 2 trillions USD worth of Gold. At today's price (1880 USD per ounce ~ 66,000 USD per kilogram), it would represent around 30,300 tons of gold. To put that in perpective, a total of 165,000 tons of gold have been mined in human history, the total amount of Gold the USA hold is 8133,5 and the amount of Gold helf by the SPDR Gold Shares ETF is 1239 (May 2011).
So the Gold price would have to go much higher if China decided to convert 2/3 of it forex reserves. This would be a process taking several years (or maybe decades) , and China would finally need to hold less than 30,300 tons of Gold, as the Gold price would go up.
If the US, Europe, Japan or Great Britain experience massive inflation or even hyperinflation, the Gold reserve required by China to reach 2/3 of forex reserves would also decrease.
One last point, that is not directly related to China: Pension funds in the US currently hold around 0.3% of their assets in Gold bullion and gold mining shares whereas the historical norm during between 1960 and 1980 was around 5% and it went to 20% during the Gold bubble in 1980.
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