by Marin Katusa, International Man:
Earlier this year, gold prices hit all-time highs in most major currencies.
The British Pound… the Canadian Dollar… the Australian Dollar… the Indian Rupee… the Japanese Yen… the Chinese Yuan… the South African Rand… and more.
It also broke above $1,500 in dollar terms. The highest it’s been in 6 years.
This shouldn’t come as a total surprise…a trade war between global economic powers, global debt spiraling out of control…
Iran and North Korea building up weapons…
The world is in uncharted waters.
Are the chickens going to come home to roost?
Today I’ll share a few of the major key themes that every investor needs to be aware of right now.
The Chinese Yuan is in Freefall
Given the recent onslaught of tweets from Donald Trump, you’d think the Chinese Yuan had just started falling.
In reality though, the Yuan has been depreciating since 2014.
This trend was further magnified when the Chinese government let the Yuan fall below its symbolic threshold of 7 Yuan per U.S. dollar.
When this happened, the #POTUS tweeting machine went out in full force, labeling China a currency manipulator.
Below is a chart which shows the historical exchange rate between the Yuan and the U.S. dollar.
Currency devaluation aside, it makes a lot of sense to own assets which hold their value.
Physical assets like gold, art and vintage wine all make for excellent hedges against currency devaluation.
But it’s tough for major institutions or governments to buy enough art or wine to truly protect themselves. This leaves gold as the number one acquisition.
It should come as no surprise that central banks have been very active in buying gold.
The Chinese Central Bank is Buying TONS of Gold
And I mean that literally.
Just so far this year, the Chinese have acquired 2.7 million ounces (92.5 tons) of gold. Using a spot price of $1,500, that’s $4 billion worth of bullion.
Below is a chart showing Chinese Gold Reserves.
As a country focused on exporting more than it imports, it’s no surprise China wants to keep its currency value low. I could see the Chinese accumulating more gold over the coming months if their currency continues to weaken due to the trade war.
The U.S.-China trade war has not only impacted the American and Chinese economies, but the entire pattern for global trade as well.
Leading global economic indicators like national Purchasing Manufacturing Indexes have only recently begun to nosedive. And this could easily be just the tip of the iceberg.
To make matters worse, it’s getting harder and harder to find somewhere safe to park cash.
In times of chaos, government bonds are usually a standard go-to investment.
However, times are changing.