Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Currency Market Chaos Sends Gold Soaring

Commodities / Gold and Silver 2010 Oct 13, 2010 - 05:11 PM GMT

By: Mike_Shedlock


Best Financial Markets Analysis ArticleEmerging market economies are under increasing stress as a result of the horrendous economic policies of the Fed.

In order to prevent unwanted strengthening of their currencies, Emerging Asia sets up controls to curb capital inflows

Thailand announced on Tuesday that it will impose a 15 percent withholding tax on interest and capital gains made by foreign investors on Thai bonds, accentuating the emerging economies' drive to put in place regulatory controls to curb capital inflows that contribute to a surge in currencies.

A persistent low interest rate regime in the developed world is pushing global investors to tap into the high-yielding markets, leading to currency worries in most of emerging Asia.

Export-dependent economies like Japan, China and Brazil have been in a race to rein in their currencies of late as huge amounts of money flowed from anemic western economies to their systems. China has maintained a tight leash on the yuan to ensure their export competitiveness, while Japan intervened in the markets to stem the yen's gains. Brazil last week raised a tax on foreign portfolio inflows into bonds and some other financial instruments to 4 percent to contain the rise of its real currency.

Traders believe South Korea has intervened repeatedly in the currency markets to rein in the won. In the Philippines, government officials have said the rise of the peso is a matter of concern.

Analysts say the afflicted Asian countries are addressing the problem in three ways.

In countries like South Korea, Australia, the Philippines and Indonesia policy rate hikes are either being scaled-back or delayed. "Less monetary tightening in Asia will help to contain interest rate differentials, thereby reducing the incentive for capital inflows," say the analysts.

Secondly, currency market intervention has increased and foreign reserves are going up, providing the countries a cover against further shocks in the financial system.

The third route, the analysts say, is the imposition of capital controls.

"For now the restrictions are mild and targeted toward speculative inflows. This will probably stay the focus. Draconian measures were introduced in Thailand in late 2006 but these are widely-recognized across Asia as having been a disaster."

Japan's Vows Decisive FX Moves

It's not just emerging markets feeling huge stress as Japan's Noda vows decisive FX moves after G7 meeting

Japanese Finance Minister Yoshihiko Noda said on Tuesday that Japan will continue to take decisive steps against excessive currency moves, including intervention, helping the dollar to recover further from a 15-year low against the yen.

Noda's reiteration of Japan's currency stance highlighted the risk of another round of intervention to weaken the yen after Japan weathered a flurry of weekend Group of Seven and IMF meetings with no overt criticism of last month's yen selling -- its first in six years.

Forex Market In State of Disarray

Rosenberg discussed Forex stress in Tuesday's Lunch with Dave.

Meanwhile, the foreign exchange market is in a state of disarray and while everyone gazes at every nuance coming out of the Fed, a really big story is unfolding in this increasingly unstable currency backdrop. Thailand, following in Brazil’s footsteps, imposed a 15% tax on foreigner bond income. The Korean won is falling from its lofty heights on FX intervention concerns. The BoJ has already aggressively moved twice in the past month to weaken the yen to no avail — Japanese consumer confidence was released overnight and it fell for the third month in a row in September — as has been the case with the Swiss National Bank, which has tried with futility to weaken the Swiss franc.

China is printing money at nearly a 20% annual rate to prevent a yuan appreciation even in the face of intense global efforts to encourage the country to strengthen the unit. (The last thing China wants to do is buckle to U.S. pressure like Japan did following the 1985 Plaza Accord, which strengthened the yen and sent the country into a 25-year deflationary stagnation period.)

The Bank of England is talking about QE as well … these beggar-thy-neighbour money printing exercises to stimulate local economic conditions increasingly look like a zero-sum-game. Only the euro has held steadfast because Trichet refuses to cut interest rates or embark on quantitative easing — though the fiscal problems in the periphery are worrisome and will continue to cloud the future of the currency; however, don’t worry, owners of German bunds think they will ultimately get repaid in D-marks.

Of course, gold could be the only asset class that makes sense here. If the bond market is right then we get deflation and gold is a hedge against the uncertainty such an environment would entail. If the equity market is right, then we get gobs of liquidity out of the Fed and then we go off to a new reflationary credit cycle — gold benefits here too. And, if the commodity complex is right, then we are heading towards a new inflationary cycle and of course gold is a classic way to play this scenario. So in response to Mr. Tepper, it’s not the equity market that is in position for a win-win, it is the precious metals market. Gold is hugely overbought right now and long overdue for a corrective phase, which will likely pose yet another great buying opportunity.

Life Imitates Art

I received an interesting email from reader "Jack B" regarding capital controls.

Jack writes ...

Hello Mish

I recall reading last week that Brazil had imposed limits on incoming capital. Now Thailand has imposed a tax on interest and capital gains made by foreign investors to Thailand.

The reason I find this so fascinating is it is an eerie example of life imitating Hollywood. In the 1983 wall street movie "Rollover," there's a great scene in which an older "statesman of Wall Street warns a young upstart that, "...first you'll see a lot of jawboning by the president, and that won't work. Then, they'll take to selling gold, and that won't work. (BIS has already done this) And then you'll see capital controls!

And that will be the end. Then you'll see a Depression that makes the thirties look like a Kindergarten!"

Bernanke & Co are just continuing the ol' Greenspan PUT: always and everywhere, coddle the Wall Street fraternity. Well, if that is the Chairman's wish, fine; but the entire global economy is at risk.

Please keep up the excellent coverage of our post-WW II-like global economy!


Message of Gold

Gold is up another $25 today and has been on a tear ever since late 2008.

By now it should be obvious to everyone (including Prechter), that gold is acting like a currency for the simple reason that gold is money. Gold is performing well in these conditions because it should.

For more about why Gold is Money, please see ...

By the way, those articles were penned under the name "Trotsky" who is also my friend "HB", who now has his own fine blog on Austrian economics: Acting Man

As money, one should expect gold to perform well against all the other currencies that every country is in a mad race to debase.

Finally, please note that Gold is not rising because of inflation in the US, but rather because of the Fed's foolish attempt to defeat deflation. For more on this line of thinking, please see Inflation Expectation Noise

Because all the central banks have joined in on competitive currency debasement, gold is rising in terms of every fiat currency, again, just as one should expect.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2010 Mike Shedlock, All Rights Reserved.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Bob Bbq
16 Oct 10, 06:36
usd gold

Most likely, the rise of the USD

price of gold is inversely proportional to

value of the USD ivs other currencies.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in