The Daily Market Report: Do you have enough gold?

25-Aug (USAGOLD) — Gold pulled back into the range on Tuesday after the PBoC responded to today’s latest rout in Chinese stocks by cutting interest rates. More easy money policies provided support to global shares, lifting the dollar as well, which weighed on gold.

The PBoC cut the benchmark one-year lending rate by 25 bps after the Shanghai Composite nosedived yet again, falling another 7% in the wake of Monday’s 8% plunge. There are rumors circulating that the PBoC may have spent as much as $500 bln in FX reserves this month in its dramatically unsuccessful attempt to underpin its stock market.

I wouldn’t be surprised at all if the number was actually higher. Back in April, the Wall Street Journal reported the PBoC “spent an estimated $231 billion in March to prevent the yuan from sliding further against the dollar.” It’s almost comical, given that five-months later they are devaluing the heck out of the yuan versus the dollar through direct debasement and easier policy.

The yuan continued to weaken today, dropping to 6.4142 to the dollar. However, Bloomberg reports that “Chinese agencies involved in economic affairs have begun to assume in their research that the yuan will weaken to 7 to the dollar by the end of the year,” and 8 to the dollar by the end of 2016. Welcome to the currency war.

Those projections — which suggest a depreciation of more than 8 percent by Dec. 31 and about 20 percent by the end of 2016 — were adopted after the currency was devalued this month and compare with analysts’ forecasts for the yuan to reach 6.5 to the dollar by the end of this year. – Bloomberg

A researcher at the PBoC says the Fed is to blame for recent market volatility because it fostered the notion that U.S. rates would start rising in September.

Yao Yudong, head of the People’s Bank of China’s Research Institute of Finance, said the expected Fed rate hike next month had been the “trigger” for the wild market swings. — Xinhua

Rather than dispute who is to blame, I think we can all agree that central bankers the world over are to blame for inflating asset prices to unsustainable levels. This is the direct result of accommodative global monetary policy resulting from weak economic growth.

As we noted in yesterday’s DMR this is really a story of mounting growth risks. Stalling global growth precipitates extraordinary measures by central banks, leading to asset bubbles and extreme market volatility.

With stocks rebounding today — albeit not nearly by the same magnitude as the recent losses — and gold lower, now may be the ideal time to rebalance your portfolio. Do you have any liquid assets in your physical possession, rather than a little blip on a computer screen? Something shiny that is outside the realm of the traditional banking and financial services realm? Something that has a proven track record as a safe-haven, dating back thousands of years?

Do you have enough gold?