To gold or not to gold

Posted: June 1, 2016 in Uncategorized

Apart the idea that gold is an insurance – what is happening to gold – the best asset this year up to end of April.

One word: the federal Reserve. As soon as the FED starts talking up interest rates, US Dollar appreciated and takes out the steam pumping gold.

My theory is that the FED is more jawboning the interest rates hikes than doing it for real simply because the US economy cannot stand a very strong US Dollar.

So it can hike up at max one time.

On the other side…the Fed could hike for real.

In that case China has an issue as the Yuan is pegged to the US Dollar (which would rise) and start devaluation (by the way they are already doing it…the yuan is down in May).

As China is starting to be more stringent with capital control…a devaluation would force wealthy Chinese to buy gold to protect themselves against the devaluation.

So even if gold is testing its support (USD1,180- USD1,200) I am not overly worried.

Again this is general information and not advise.

 

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