Gold turns sharply lower on China ambassador’s yuan comments over the weekend

Gold took a sharp turn below the $1200 mark in Asia overnight that carried over to early trading in New York. The metal is down $10 on the day at $1191. Silver followed suit – down 41¢ on the day at $14.08. The bulk of the damage came from a drop in the yuan.

FOREX markets’ concerns about the yuan took a turn for the worse over the weekend. Tui Tiankai, China’s ambassador to the United States gave a speech in which he stated that “On what to do next, for China it is very clear. I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

The Plaza Accord was an agreement among major industrial countries in 1985 to drive down the value of the dollar against other currencies, particularly the Japanese yen. Cui’s comments were reported in Xinhua, China’s official press organ. The market reaction has been swift and gold is not the only casualty. The Dow is down 120. Bond yields are climbing and commodities across the boards, with the exception of oil, are taking a hit.

How much of this is posturing on the part of China and how strongly the Trump administration is likely to react to the statement are both open questions. The president has already made it clear that he would like the Fed’s cooperation in driving the dollar lower, so there is no doubt that the currency situation is at the top of his agenda.

Quote of the Day
“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.” – Ron Paul, 8/27/2018

Chart of the Day

Chart note: To learn why this chart is important to current and prospective gold owners, please see: Gold: A reverse bubble in search of a pin – The victim could quickly find itself the beneficiary.

 

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