GOLD has crossed the 1,400 mark reaching a high of 1,420 http://www.goldprice.org/
Moving forward, please expect turbulent ride as more punters are attracted to the UNSTOPPABLE. However, there is still NO sign of bubble in my bold view.
In fact, the key driver of the GOLD rush as I would conjecture stems from the currencies war and protectionism that the major economies have been 'diplomatically' pledged to avoid. Truth is, under this bedrock, I sense most of them seeking hedge forms against the down force of their currencies via this precious metal.
Since the Chinese has not kept to its promise to let the yuan appreciate in accordance to its 'actual/true' valuation against the other foreign exchange counterparts, and there apparently is no way to make them succumb despite appeals and slammings on its currency policy, the only way out is 'tic for tac'. i.e if yuan is not going up, then lets go down.
And so, the common sense is to use gold as a 'buffering' mechanism against falling exchange rates to gain competitive export advantage. That is to say that on the one hand, losses are suffered due to falling rates but the rising gold price is providing the cushion to offset the pain. This inter-relationship has become obvious. Falling USD and rising Gold price.
As a wild guess, it does not look like an one-on-one war. It seems that the G-Forces are in alliance. It is going to be another catastrophic episode for the market place soon; one which is unprecedented again if the Yuan remains persistently 'undervalued'.
Drawing on case study of the 97' Asia Currency Crisis, though the underlying factors are rather different, the consequences however may be the same. When major rates fall, other governments or its treasuries are sandwiched between to peg along or depeg. If it chooses to peg in order to save its export market, those companies/countries that have USD denominated loans at pre-agreed fixed rates will have to service these loans harder. If it chooses not to follow, it might kill its export oriented companies. It cuts both ways with rates instability.
So, the game has actually quietly started. Whoever managed to seek refuge in the gold rush now has an upper hand. And I will allude that much of the gold has gone Westward.
Much as I would hate to think that we are falling in another crisis so shortly after having miraculously rebounded from the 2008 Crisis, it seems the next wave is near the shore. The consolation however is that this is a financial war and not a weaponized war.
Conclusion: Whether or not the currencies war will protract and balloon into a catastrophe, the GOLD RUSH has already established its rally foothold targeting to inject the FEAR element for its next phrase of upwards momentum. The strength in its price movement strongly suggests a play at sovereign level; 'this force is' many times more craftier and powerful than George Soros who brought down Asia in the late 90s.
P.S When the gold price becomes more choppy, it is sign that more and more participants are attracted into the play.
I will keep monitoring for impending bubble, but not playing god. Just my interest to observe and share.
Until then
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