Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Sun, Jul 24, 2005
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HIGHLIGHTS in "Global Watch - The Gold Forecaster"
Silver - COT, Gold : Silver Ratio EDR.V, SSRI, PAAS, SIL, HL, CDE / Platinum.
SHARES: HUI, NEM, FCX, GFI, HMY, DROOY, NG, VGZ, GSS

Features: -
- Market Action / Short-term forecasts across the Board!
- Comex positions: Commercial Shorts Help to Indicate Price Movements
- At last a Yuan Revaluation -The Enigmatic Chinese economy
- The Oil price, steady at the starting post.
- Prospects for the U.S. $ - Prospects for the US $ Short/Long-Term
- DJIA - 10-Year Bond - CRB - Gold : Oil Ratio - Record Lows.
- Summary: The present Gold Price Drivers.
- Technical Analysis of the Gold Price: Long/Short term in U.S. $
- International Gold Markets / Focus on Euro, Euro Gold Price

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Excepts from the "Global Watch - The Gold Forecaster": -

At last, a Yuan Revaluation!
China has cut the link to the U.S. $ of Yuan 8.277, switching the link to a basket of foreign currencies instead at Yuan 8.11 a 2.02% revaluation. This is a major step for the Chinese, always cautious, taking small steps to gauge the unseen impact before taking larger steps.

From now on the Yuan will be allowed to trade in a tight 0.3% band against a basket of foreign currencies, the government said. It has not disclosed which currencies these are, but will likely be the currencies of the most important Trade partners of China.

It said the central bank would announce the Yuan's closing price each day, and that rate would be the midpoint of the next day's trading band. Chinese officials said any abrupt change in its currency system would cause turmoil, hurting its fragile banks and financial industries.

[Malaysia simultaneously announced it was dropping its own policy tying its currency, the ringgit, to the U.S. dollar and would adopt a similar arrangement.]

The market jumped almost in fright when the announcement was made, but needs time to digest the implications of the delicate extent of the revaluation. To us it is a 'giant' leap in the monetary system because the implication is that instead of asking for $ prices or giving $ prices, they will accept prices in the currencies in the basket. This is critical, as the use of the $, with regard to both imports and exports will diminish as the basket currencies take its place to the relevan extent! If the U.S. $ is reduced from its current level of 80+% of global trade to the extent implied by the basket, the $ should decline and foreign exchange markets become increasingly more volatile.

Asian countries that have a large and growing dependence on Chinese trade will do as China does, so magnifying Chinese foreign exchange activities. Include in these Taiwan, Japan, Korea, et al. As Malaysia has joined them in this policy, so we now expect to see others do so in the future.

We will provide the full story as we see it to new [and old] Subscribers of the "Global Watch - The Gold Forecaster".

In summary, the $ as the one global reserve currency will now be joined by others, but in such a way as to change the stability and volatility and future of the global Foreign Exchanges permanently! It will be vital to understand not only what has happened but why and with what purpose it has happened!

The Oil Price steady at the starting post
- The Unocal Saga

Is this about a financial transaction or is it political manoeuvrings? The latter it seems, but in the guise of a financial transaction, or did we not see the value in a $63 Cash and Stock offer from Chevron against a $67 Cash offer from CNOOC?

The Chinese will, we expect, raise their offer until it is a full-scale political showdown. They have to! If the Japanese felt the pressure of no resources of their own and went to war over it, the Chinese must be aware of the high stakes in this story. It is a useful banner for the future. The way this deal goes will confirm if Politics overrides Capitalism and its Cash.

Should the U.S. retain control over Asian energy reserves [we are talking the heart of the deal being Unocal's oil and gas fields in Asia, mainly in Indonesia, Thailand, Myanmar and Bangladesh, as well as a scattering of assets in North America, which hold a total of 1.7 billion barrels of proven oil and gas reserves], it will have a small sort of hold over Chinese development.

We looked at the map of the globe on this one. Although the Pacific Ocean is huge, but between the two, the U.S. has an impressive presence not only in Japan but also in other parts of Asia, which brings the two very close on this one. But any form of war is out of the question, except for a 'commercial' war, which was started when the Senate approved an amendment on 13th July that would require the secretary of state to report to Congress before any takeover of American assets by a government-controlled foreign company.

The financial hold on China will hold, but only if deals such as these, are thwarted by the U.S.! Round one to the U.S. but how many rounds will there be?


Source: NY Times

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.
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