Thats a very fair point. The only thing I would say is that Indian rupee has not been particularly strong anyway, so you are not really talking about a trend change. And it has been striking how strong gold has been in a strong dollar environment
Yes I agree, INR is definitely a 'soft currency' while CNY is now a de-facto hard currency.
I agree that Gold is strong despite USD strength, although I would ascribe that more to geopolitics (reserve diversification from China and Russia) rather than a big macro trend change necessarily.
Brad Setser noted that China last had a round of reserve diversification out of USD into EUR and other minor currencies over 2005-12. In 2012 they were largely finished, and coincidentally (not?) the dollar started rising again. So once the PBoC and SAFE are done, whenever it may be, I would be bearish gold.
What do you think about markets testing PBOC arsenal? On Friday, we saw Chinese banks swapping Yuan for dollars and PBOC coming out and saying they will curb speculation.
Today USDCNH is back trading at those levels on Friday. Surely Speculators try to get USDCNH to 7.4-7.5 and then maybe we see what action PBOC take?
What happens if instead of China devaluing India devalues instead? That's one thing that makes me wary of going long GLD at these levels.
Thats a very fair point. The only thing I would say is that Indian rupee has not been particularly strong anyway, so you are not really talking about a trend change. And it has been striking how strong gold has been in a strong dollar environment
Yes I agree, INR is definitely a 'soft currency' while CNY is now a de-facto hard currency.
I agree that Gold is strong despite USD strength, although I would ascribe that more to geopolitics (reserve diversification from China and Russia) rather than a big macro trend change necessarily.
Brad Setser noted that China last had a round of reserve diversification out of USD into EUR and other minor currencies over 2005-12. In 2012 they were largely finished, and coincidentally (not?) the dollar started rising again. So once the PBoC and SAFE are done, whenever it may be, I would be bearish gold.
What do you think about markets testing PBOC arsenal? On Friday, we saw Chinese banks swapping Yuan for dollars and PBOC coming out and saying they will curb speculation.
Today USDCNH is back trading at those levels on Friday. Surely Speculators try to get USDCNH to 7.4-7.5 and then maybe we see what action PBOC take?
Interesting that it think the Yuan should strengthen. Are you worried about the many arguments of Yuan devaluation?
Why devalue now after all this time?
Russell - am getting used to your rhetorical style now and always read the final paragraph first (after being triggered by the “🚨180-risk🚨” title!)