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- The Financial Crisis Began Five Years Ago
- China to Cut Rare Earth and Strategic Metal Production
- Strategic Metals that make your Computer Work
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- Why Do We Buy Metals?
- In a Down Economy Tungsten Continues to Outperform
Since the financial crisis of 2008 China has been signing agreement after agreement with other sovereign nations for bilateral currency swaps. China and these other nations are trying to diversify their central bank foreign - exchange reserves out of U.S. Dollars. China would like its currency, the Renmimbi, to play more of an important role in the world financial system. Here is a list of the fourteen nations that have already signed bilateral currency swap agreements with China.
- Pakistan
- Argentina
- South Korea
- Indonesia
- New Zealand
- Malaysia
- Belarus
- Hong Kong
- Japan
- Uzbekistan
- Thailand
- Turkey
- Singapore
- Kazakhstan
After the collapse in 2008 Chinese exporters were finding it difficult to do international trade as they were unable to settle their deals with Yuan (Renmimbi) and were forced to settle in Dollars. The currency swap agreements will make it easier for now for international companies and traders to receive financing in Yuan during difficult economic periods. If they can settle their deals in Yuan (Renmimbi) it would reduce their risk. China and these nations would like to keep trade flowing even in the event of another financial crisis.
What is a Currency Swap? Essentially a currency swap is a transaction between two nations to exchange the interest and principal payments on loans issued by two different nations. The two countries gain access to foreign exchange reserves. This limits the nations exposure to exchange rate fluctuations because they can pay back the liability associated with its currency instead of in Dollars.
Why is China so concerned about the U.S. Dollar? China has grown suspicious of the US government unwillingness to curb its spending and printing of its currency. This runaway printing has and will continue to devalue it dollar-denominated assets. Recently we are hearing that the US Federal Reserve will quietly implement QE3 (Quantitative Easing 3).
China would like the world to look upon its currency as a store of value similar to Gold and the Dollar. This privilege has given the US the ability to expand and borrow. China would also like this ability. If nations hold reserves in Yuan (Renmimbi) it is extending credit to the Chinese government. These currency swaps are the first steps in Yuan (Renmimbi) transforming in to a global currency. How many more countries will sign agreements with China in 2012? How will the USA and the IMF react? I look forward to seeing the results of China spreading its influence.
Randy Hilarski - The Rare Metals Rare Earth and Rare Industrial Metals Specialist
Web: www.swissmetalassets.com
Silver to outperform gold
Eric Sprott believes that silver is likely to be the investment of the decade and could easily get to $50 per ounce by the end of the 2011. Eric Sprott is the founder of the Toronto-based investment firm, Sprott Asset Management LP. His renowned hedge fund, Sprott Hedge Fund LP, is heavily weighted in precious metals and has generated an estimated 23% annualized return over the past decade.
Silver promises to become the next big buzzword among investors in 2011 and beyond, according to one of the investment industry’s most prescient and successful experts on precious metals. “I think that silver could easily get to $50 this year,” Sprott tells BNWnews.ca.
Meanwhile, Sprott says the big catalyst for surging silver prices in the coming years will be exponentially increasing investment demand, which is already beginning to overwhelm existing silver supplies. The mining industry only produces around 800 tonnes of silver per annum. This is a relatively inelastic supply, regardless of silver prices, he adds.
As household investors are becoming increasingly jittery about the debasement of the U.S. dollar and other major currencies, they are loading up in record numbers on silver bars, coins and silver-denominated exchange traded funds, Sprott says.
However, there’s also a quantum shift in investment demand taking place among big players in the precious metals market, including India (which is aiming to increase its imports by about 77 million ounces per annum), and of course China.
“China’s net imports of silver were 112 million ounces last year. In 2005, they were net exporters of 100 million ounces,” he says. ”That’s a 200 million ounce shift in an 800 million ounce annual market that seldom ever grows because production hardly ever goes up. So where’s it all going to come from? We don’t know.”
In fact, silver promises to outshine gold over the coming years, Sprott says. “Silver is the poor man’s gold. Gold has had a great run for the past 11 years. But I absolutely believe that silver will outperform gold this year. Currently, there’s more investment dollars going into silver than into gold.”
Such a game-changing scenario should recalibrate the gold to silver pricing ratio in silver’s favor, thereby eventually restoring it to its traditional level of about 16 to 1, he says. “It’s the easiest call of all time.”
“Silver as a currency always traded in a ratio of around 16 to 1 compared to gold, when it was a currency in the U.S. and the U.K. The current ratio is 48 to 1. If we go back to a 16 to 1 ratio, the implied price for silver would be $85.62 (per ounce).” he adds.
“On that basis, if gold goes to $1,600, then that would value silver at $100. And we certainly think that gold is going to $1,600. In fact, I’m willing to bet that this ratio will overshoot on the downside. It might even get to 10 to one.”
The only reason why silver is still trading at a 48 to 1 ratio to bullion’s spot price is that its price is being “manipulated” by big banks, Sprott says. That’s because they don’t want precious metals to become a popular alternative currency to Fiat money (currencies that are not backed by hard assets).
“Then there’s also a huge short position out there on silver,” he adds.
But time is on silver’s side, he says, as the sovereignty debt crisis deepens in Europe and a continued policy of qquantitative easing in the U.S. continues to undermine the value of the greenback.
Recent Posts
- What Are the Strategic Metals Offered by Swiss Metal Assets
- The Financial Crisis Began Five Years Ago
- China to Cut Rare Earth and Strategic Metal Production
- Strategic Metals that make your Computer Work
- VW Upset Over Chinese Firm Espionage
- Why Do We Buy Metals?
- In a Down Economy Tungsten Continues to Outperform
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- Silver Stalls Ahead of Fed Event August 31, 2012
- Copper Market Anxious Despite China’s European Bond Buying Plans August 31, 2012
- Potash Mines Stall as Food Prices Climb August 30, 2012
- Talison Acquisition Means Rockwood Now Controls 55% of Lithium Supply August 30, 2012
- Dangers of Indonesian Tin Mining Highlighted August 30, 2012
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