Today’s
AM fix was USD 1,786.50, EUR 1,380.92, and GBP 1,109.01 per ounce.
Yesterday’s AM fix was USD 1,777.25, EUR 1,374.73and GBP 1,102.38 per
ounce.
Silver is
trading at $35.08/oz, €27.13/oz and £21.84/oz. Platinum is trading at $1,707.00/oz, palladium at $664.50/oz and
rhodium at $1,180/oz.
Gold edged up
$3.40 or 0.19% in New York yesterday which saw gold close at $1,778.50.
Silver initially climbed to $34.848 then it fell off in afternoon trading and
finished with a loss of 0.06%.
Cross Currency Table - (Bloomberg)
Gold inched up
on Thursday, continuing its 4th day of gains as investors await more clues
from central banks on further stimulus plans.
Today, The ECB
has a rate decision at 1145 GMT and Bank of England at noon local time.
Investors will
watch the key the nonfarm payrolls figure on Friday to determine if QE3 is
beginning to stimulate the US economy.
Alan Wheatley,
Global Economics Correspondent for Reuters has written a very interesting
article, 'Analysis: China's currency foray augurs geopolitical strains’
where he emphasizes China’s desire to wean out the US dollar’s
currency reserve status.
China is
actively taking steps to phase out the US dollar which will decrease
volatility in oil and commodity prices and deride the ‘exorbitant
privilege' the USA commands as the issuer of the reserve currency at the centre of a post-war international financial architecture
which is now failing.
In 1971, U.S.
Treasury Secretary John Connally said, "It's
our currency and your problem".
China is
frustrated with what it sees as the US government’s mismanagement of
the dollar, and is now actively promoting the cross-border use of its own
currency, the yuan, or also called the renminbi, in trade and investment.
China’s
goal is to decrease transactions costs for Chinese importers and exporters.
Zha Xiaogang, a
researcher at the Shanghai Institutes for International Studies, said Beijing
wants to see a better-balanced international monetary system consisting of at
least the dollar, euro and yuan and perhaps other
currencies such as the yen and the Indian rupee.
"The
shortcomings of the current international monetary system pose a big threat
to China's economy," he said. "With more alternatives, the margin
for the U.S. would be greatly narrowed, which will certainly weaken the power
basis of the U.S."
Zha's comments were highlighted at a seminar
in Bahrain this week on the geopolitics of currencies organized by the
International Institute for Strategic Studies, a London think tank.
GoldCore brought up these issues back in 2005.
Rising economies of China, India and the Middle East are looking at trading
options that do not include the greenback.
Not only the
East but their financial ministry colleagues in the West are also questioning
the current monetary order. Change is certainly around the corner.
At the Clinton
Global Initiative last week Goldman Sachs CEO Lloyd Blankfein
said that the US could risk its status as the world's reserve currency if
congress fails to act and the "fiscal cliff" program of tax
increases and spending cuts is enacted January 1st.
If the US
continues its trillion dollar deficits and does lose
its reserve currency status what will a world without a reserve currency look
like? That is what economists, think tanks and finance ministers are
grappling over today.
John
Williamson, one of the foremost academics on exchange rates, and a senior
fellow at the Peterson Institute for International Economics in Washington
examined the benefits of the US dollar’s reserve status.
He recognized
two ways that US power is enhanced in the world economy by the
greenback’s dominant role, which he doesn’t see challenged in the
next 25 years.
First, the
$3.2 trillion in official reserves that China has accumulated in maintaining
the yuan's semi-fixed peg to the dollar tie
Beijing's policy hands. That is because any hostile gesture, such as a threat
to shift out of dollars, would destroy Chinese wealth.
Second,
because of the extensive private use of the dollar globally, the United
States is better able to enforce a financial embargo such as the one now directed
against Iran.
China also
faces risks including foreigners reinvesting their yuan
back into China’s security markets. Such inflows may alter exchange
rates and interest rates and would weaken the Communist Party’s grasp
on their economy which would create an unpredictability that is against the
iron rule it enjoys.
Currency wars
are not new and often rising economies show their resentment of incumbents,
notably the USA, who they view as printing money first and worrying about the
effect on the global economy later.
Surjit Bhalla, Indian
economist and author of "Devaluing to Prosperity” feels the
massive undervaluation of the yuan was a major
reason for China's meteoric rise and the deep economic imbalances that led to
the 1997/98 Asian financial crisis and the 2008 global crash.
He sees little
merit in greater international use of the yuan but
expects Beijing to push up its real exchange rate by 3-5% a year in order to
help lift private consumption to at least 50 percent of national output over
time from around just 35 percent now.
"This
will be one of the most remarkable win-win situations of recent times,"
said Bhalla, chairman of Oxus Investments, a New
Delhi hedge fund. "Currency peace is breaking out. There have been
currency wars, but now is time to enjoy the peace."
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