What does GOLD do when China move on its currency next month????? ANY THOUGHTS--BUY NOW or WAIT TILL IT HAPPENDS BEIJING (AFX) - The Bush administration has told key senators that it expects China to revalue its currency in August ahead of a planned visit to Washington by President Hu Jintao in September, the Financial Times reported, citing people familiar with the matter.
The newspaper said Senators Charles Schumer and Lindsey Graham, co-sponsors of a bill that would impose a 27.5 pct tariff on Chinese imports, agreed to delay a vote on their bill after receiving what they regarded as an assurance that China will move on its currency next month.
In a June meeting attended by Federal Reserve chairman Alan Greenspan, Treasury secretary John Snow told the senators that he believed China would allow the value of the yuan to increase against the dollar in August, people familiar with the discussion said.
The paper said the US Treasury has told Beijing it needs to revalue the yuan by at least 10 pct against the dollar.
China is considering introducing a currency regime similar to the managed float operated by Singapore, the paper said.
Under this system the yuan would be pegged to a basket of currencies reflecting the country's trade, but the details of the weights of the basket would not be made public, the paper said, citing a person familiar with the Chinese administration's thinking.
It immediately depreciates the Dollar against the YUAN, in other words, the Chinese (big buyers in Gold) get a discount equal to the % of the revaluation (if it revalues 10%, they get Gold at a price 10% less because Gold is valued in Dollars, so Gold should adjust up 10% - not in one day though).
Also, all the products we buy go up 10%, so we immediately import inflation. If the Chinese use the Singapore model (thanks for the post taek) and float their currency, the Dollar will continue to sink against the YUAN, also causing it to sink against the Euro and Yen, which will revalue Gold up to the $500 area.
Our government in their infinite stupidity want to devalue the Dollar desperately. If they think the Chinese want to buy our companies now, wait until they get a 50% discount after a period of currency market revaluation!
Gold is now reflecting that we are going to 4% on the Fed funds rate (the reason for the latest decline in Gold). We are near the end of the hikes, the next to last one will start a very strong Gold rally (stocks will lead as they just did). I hope some of you sold some 17.5 covered calls on GLG for a part of your position (money in the bank). I have a huge pile of GG and GLG puts and calls expiring worthless today (I keep the money), big month. I hope some of you did as well. Overlongterm, you out there? Did you sell some of your stock?
It does not necessarily follow that Chinese export prices will reflect a yuan revaluation. Productivity increases and smaller profit margins will probably assure continued Chinese competitiveness.So the inflationary effects may be far less than you seem to take for granted.To hang your gold bullish hat on yuan revaluation may be a mistake. The current US$ rally and Gold action is warning of that.
Hi PWR, always good to hear from you. I guess I am a buy and hold type of guy. I believe POG is going to $500 as you predict and try not to worry about daily fluctuations. I needed some money recently (flew from Japan to LA,stayed in Venice Beach, hired a PT Cruiser and drove to LV and and back. Then flew to NY and stayed at Wellington Hotel cnr of 55th St and 7th Ave,took Gyrocopter lessons on Long Island, had a great time, ate too much, saw Broadaway shows etc then drove a new Lincoln Town Car to Toronto via 1000 Islands, and back via Niagra Falls, then back to Tokyo - business class all the way) Incredible trip, loved it all, the US is great place (other than the religeous fundamentalists on TV and in your face on the street) and 3 weeks was not enough.
So had to sell some stock, so rather than sell gold stocks I sold my Apple and Google, OUCH!
I can't do calls or puts or buy mutual funds (not US citizen so Etrade won't allow) so have to buy stocks that simply go up!
The way the dollar has rallied against all logic makes me still feel like it is all gambling. But I see for you it is trading with much lower risk. I have been badly hurt by the market (9/11 killed me along with the 3,000 that were really killed) but far less since I started listening to you...thanks...