Tuesday, October 19, 2010

A bank with sense? what about gold?

Miners pull FTSE lower after China rate rise

China will raise its benchmark one-year lending and deposit rate by 25 basis points effective from October 20, the central bank said on Tuesday.

Posted by mark @ 01:11 PM (1224 views)
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2 thoughts on “A bank with sense? what about gold?

  • general congreve says:

    Gold has apparently given up it’s daily gains (on average across all currencies) on this news. However, surely higher interest rates in China will attract investment in the yuan, pushing it up versus the dollar (exactly what the Chinese don’t want). It’ll also drive the dollar down, weakening the US economy. Sure it’ll strenghten what exports there are, but Chinese goods won’t be as cheap to US consumers, as consumer demand is the bulk of GDP the overall balance would be negative for the US economy.

    Ergo, an accelerated trend of defaults on mortgages and loans, pushing the US banks to the wall even quicker, requiring even more bailouts and QE, weakening the dollar further… vicious circle.

    Ultimately the dollar will lose all it’s value. It’s going to happen anyway, but looks like the Chinese are giving a shove in the right direction. The death of the dollar means only one way for gold to move. It’s not bearish BTW.

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  • i’d actually disagree with writing the obituary for the greenback just yet. Money where mouth is ? yep -Euro yesterday @ 13970 basis Dec – stops to b/even today. Every trend reversal starts with a small move… and the demise of the dollar looks – at the moment at least – to be overdone. Be interesting to see If the recent high, 141 odd, holds.

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