Gold, CNY, Devaluation And Crash – David Brady

Sunday, July 29, 2018
By Paul Martin
July 29, 2018

“If the Commercials are loading up long positions in Gold to extreme levels while the Large Speculators (aka “Funds”) add to shorts, then…”

by David Brady via Sprott Money News

July 27,2018

Back in mid-May, I wrote my first article for Sprott Money, entitled “Gold Preparing to Launch”, where I stated the following:

“In summary, based on positioning, sentiment, technicals, inter-market analysis, Elliott Wave Theory and similar readings prior to previous rallies, Gold is at or close to a low here that is likely to set off a rally to 1360 or higher in the coming weeks.”

Based on the data to date at the time, which had accurately pointed to every peak and trough in Gold in the previous three years, it appeared that Gold was about to bottom and rally yet again.

But it turned out that such data was no longer relevant for the time being, and Gold continued to fall. There were two new drivers for Gold: $/CNY and the SDR. A clear inverse correlation developed between Gold in dollars and $/CNY, seen in the chart above. The DXY was no longer a factor. Then Jim Rickards pointed out that there was also a direct correlation between Gold in dollars and Gold in SDR terms, with the latter pegged to a range of 25-50 around 900 SDR.

I covered this in greater detail in the following article: China takes control of Gold

My colleague and fellow writer for Sprott Money, Craig Hemke, also covered the $/CNY correlation in his article earlier this week: Potential Impacts of Yuan-Gold Peg

He also mentioned the risk of USD/CNY devaluation and the impact it could have on equities and gold. It is one of the factors that could trigger the crash in global equities markets I expect this Fall—a crash likely followed by a reversal of policy by the Fed and global central banks, resulting in monetary stimulus on steroids. This would catapult Gold and other precious metals to new highs, just as it did when QE1 and QE2 were rolled out.

The Rest…HERE

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