Indicating the country's growing confidence in the cross-border renminbi settlement scheme."The renminbi's internationalization is happening much faster than expected," said Neil Daswani, regional head for North Asia transaction banking at Standard Chartered. "Offshore demand for renminbi is increasing, and more Chinese imports are likely to be redenominated to renminbi rather than being settled in other currencies."Based on data provided by Standard Chartered and the People's Bank of China, an estimated 200 billion yuan in Chinese imports will be settled in yuan renminbi in 2011, increasing to 2.8 trillion yuan by 2015.Hong Kong Monetary Authority Chief Executive Norman Chan said the expansion has brought the development of offshore renminbi business in Hong Kong to a new level."I look forward to an increase in cross-border trade transactions that are settled through Hong Kong's renminbi platform. It is also hoped that banks in Hong Kong can seize the opportunities to provide more and better renminbi financial services in support of real economic activities, thereby contributing to the development of the country."The cross-border renminbi trade-settlement scheme's coverage was expanded in June, from trade transactions between five Mainland cities and the ASEAN economies to all trade transactions of 20 provinces and cities on the Mainland with the rest of the world.The renminbi will be a major reserve currency within 10 years, predicts Tan Kah Chye, global head of corporate cash and trade, transaction banking at Standard Chartered.
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From the Financial Times: EU banks face new stress-testsA new round of co-ordinated stress-tests on European banks would begin in February ... The “scope and methodology” of the new round of tests was still under discussion, [Olli Rehn, EU commissioner for economic and monetary affairs ]said, but should be disclosed fairly shortly.The last round of stress tests were heavily criticized - and all of the Irish banks passed the tests only to fail a few months later.And from the NY Times: Iceland Breaks Out of RecessionIceland broke out of recession in the third quarter of this year, official data showed Tuesday ... Unlike Ireland and Greece ... Iceland allowed private banks to fail, and its currency, the krona, has declined by about 46 percent against the dollar since the start of 2008.That isn't currently an option for Ireland, Greece, Portugal or Spain ...NY Times:http://www.nytimes.com/2010/12/08/business/global/08icecon.html?_r=1Read more…
The action in gold and silver today tells me that we may be at the beginning of a much-needed correction in precious metals. I am SO glad that I recommended Red-Hot Global Resources subscribers grab gains in China Gold International yesterday, and that the two new recommendations I made yesterday were NOT in precious metals.Looking at this chart, you can see that the kind of down day gold had today has, in the past, led to sell-offs that last about 5 days. The 50-day moving average would be the target in that case, though we may not get there.However, MACD is not confirming the latest rally. This is usually a reliable bearish indicator, and if it plays out, points to a correction to 1324.50 or even $1292.Damn, that would be a nice, welcome pullback. We’d wait for the bottom and load up the truck.Silver could suffer the same correction, only more so (because silver acts like gold on steroids in BOTH directions).So why did gold and silver correct so sharply today? It’s profit taking, pure and simple. But that doesn’t rule out a deeper pullback. A lot of fund managers have books to balance at the end of the year.And what would a deeper pullback be? Probably the best opportunity you’ll see in a long time
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Today the U.S. Dollar Index has rallied back into positive territory after starting the morning sharply lower. Normally when the U.S. Dollar Index rallies the major stock market indexes will deflate and trade lower. However, today the major stock market averages have been able to hold some of its early morning gains. This strong stock market action is likely due to the very light volume and the agreement between the tax and unemployment agreement between the President and the Republican party.
There where several asset classes that are feeling the effect of the stronger U.S. Dollar Index today. Gold, silver, and oil are all pulling back today. The popular SPDR Gold Shares(NYSE:GLD) is trading lower by $1.52 to $137.59. The pullback in the GLD comes after the popular ETF made a new high this morning. The same type of trading action took place in the iShares Silver Trust(NYSE:SLV). This morning the SLV made a new 52 week high at $30.00 and has sold off since that time. Spot crude also made a new high for the year this morning trading as high as $90.76 a barrel before pulling back. Spot crude closed lower on the session by 0.69 cents to $88.69 a barrel.
Many extended commodity stocks such as United States Steel Corp.(NYSE:X), and Cliffs Natural Resources Inc.(NYSE:CLF) also pulled back from their intra-day highs. Gold and silver mining stocks also sold off today from an extended move on the daily charts. The popular Market Vectors Gold Miners ETF(NYSE:GDX) is trading lower by $1.04 to $62.74. At this time all of these pullbacks looks to nothing more than short term corrections.
The new tax cut and unemployment agreement between the President and the Republican party should only have a short term positive effect. After all this agreement could add another $1-5 trillion to the U.S. deficit. This market is all about the short term gain and never looks at the long term pain which will certainly come again.
This morning the stock market is going bonkers once again because the President agreed to a bipartisan tax deal to extent the Bush tax cuts. The bipartisan agreement also included an extension of the government unemployment insurance which is already 99 weeks long and a payroll tax cut. This seems to have been the main catalyst for the spike higher in the S&P 500 Index futures.
On Sunday night the 60 Minutes interview with Ben Bernanke was aired. In this interview the Federal Reserve Bank Chairman defended his position to buy another $600 billion in U.S. Treasuries. He also said that he was 100 percent sure that this action would not cause inflation. As we should all know by now oil is trading over $90.00 a barrel and gasoline is trading at a new high for the year. Copper, gold, silver, cotton, and many other commodities continue to make new highs. However, the Federal Reserve Bank Chairman Bernanke does not see inflation as being a problem. He also said that his quantitative easing action does not effect the money supply. He is right, it effects the cash reserves and this causes commodity prices to rise. The next time that Chairman Bernanke gives an interview it should be conducted by a trader or someone that understands markets. The interview should not be conducted by a television reporter that obviously does not know the first thing about market mechanics and manipulation. Shame on 60 Minutes for a worthless interview.
Today the U.S. Dollar Index is losing some ground again. As the U.S. Dollar Index declines the major stock market indexes inflate and trade higher. When the U.S. Dollar Index rallies or trades higher the major stock indexes deflate and trade lower. It is just that simple at this time. Since the year 2000 the cheap dollar policy has been administered and the stock markets have experienced two major bust cycles since that time. Therefore, we can all enjoy the rally in the stock market while the music is playing. However, once the party is over it is only those with the insight that will be able to jump off or get out of the market at or near the top. This current boom cycle is likely to lead to another devastating bust cycle. Cheap money is what we have at this time and this policy has really lead to quicker boom and bust cycles. The unfortunate fact about cheap money is that each bust cycle is probably going to be worst than the one before.
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The markets jumped higher today at the open, rallying on a sharp drop in the Dollar once again. Commodities were off to the races, with gold and silver leading the charge. The SPDR Gold Trust (ETF) (NYSE:GLD) hit a high at the open of $139.54 while the iShares Silver Trust (ETF) (NYSE:SLV) hit a high of $30.00. This move was driven by the hype over the last week and yesterday. Amateur traders and investors were buying with reckless abandon, after hearing rumors that JPMorgan Chase & Co. (NYSE:JPM) was caught short and an inevitable short squeeze on silver was looming. Even the media and talking heads on TV were all over the squeeze.
When I hear this nonsense I start to salivate on the short side. Always go the opposite way of the crowd. That was all hype on JPM being caught short. The average investor who bought this morning was plainly fooled and took the bag from institutional smart money. Please, do not be so dumb average investor! It drives me crazy. Learn the game. As an expert trader and Chief Market Strategist, I implore you all, do not get caught in the hype.
Like clock work, these commodities jumped higher at the open in a frenzy of buying by amateurs, while institutions gladly sold to them. This marked the high of the day. Since the GLD hit its high of $139.54, it reversed and turned negative, dropping to a low of $137.32. The SLV collapsed from a major gap higher to turn negative. It went from $30.00 to a low of $29.12.
Never fall into these foolish tricks. Trust me, if JPM was truly short, they are powerful enough with powerful friends to push it in the direction they wanted. I would dare say, now most institutions are short silver and a small pull back has begun. Learn the tricks, do not get caught with your pants down. To get more analysis, guidance, swing trades and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
#1 Rated
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