by Andrew Wilkinson
Nov 16 2009 (FXstreet) — Commodity prices continue to accelerate to start the week after it appears that there was little hope that U.S. pressure on the Chinese authorities would allow for an appreciation of the Chinese yuan. The weekend APEC summit in Asia saw international leaders meet, with President Obama then flying off to Beijing, where limp expectations for a move from the Chinese were likely to be dashed. The picture of Chinese officials appearing to bow to international pressure is unlikely to sit well domestically, while the Chinese would rather allow the yuan to strengthen gradually over time and only when China is ready to do so.

APEC issued a statement over the weekend promising to maintain the foundation of economic recovery and promised not to remove government measures to stimulate growth. Meanwhile a Chinese commerce ministry spokesman refuted any international pressure on the yuan as unfair, saying that yuan strength “is not conducive to a global economic recovery.” The preferred path for China is a prudent policy from which it can provide stable and predictable macro economic and exchange rate policies.

The yuan link to the U.S. dollar means that the Chinese must suffer discomfort as the greenback weakens…

In other news over the weekend, a Chinese banking official accused the U.S. of funding the mother of all carry trades with its ultra-low monetary policy that was creating speculative flows into emerging and domestic markets. The banking regulator said that the U.S. policy was unsustainable and would break the back of emerging nations who were merely feeling the benefit currently of excess government stimulus…

Another record price for gold bullion, which reached $1,133.20 per ounce in early trade on Monday… Gold, which has long been seen as a counter-dollar play does seem to be coming into a new class all of its own.

Demand for gold from central banks appears to stem from more than just a broad based downdraft for the U.S. dollar and is set against a backdrop of declining mining production and (mineable) reserves.

In other words the fundamental backdrop appears to draw a line of support under the price of the precious metal, which is still well below its inflation adjusted peak in the 1980’s. Its price would have to practically double to allow for price increases.

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