Financial Times/Henry Sanderson & Lucy Hornby/11-30-2016
“China has curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers. Some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.”
MK note:
(1) Until we get hard numbers on what this means in terms of imports, these curbs are so much whistling in the wind with respect to overall demand. We should not forget that China’s stated aim is to build its official sector reserves and the stock of gold among the Chinese people. The curbs might end up putting a temporary lid on the already high levels of demand, but, then again, it might also have no effect at all – a ham-handed attempt to stop a gold buying panic within China’s borders.
(2) The bigger story here is China’s attempt to keep capital from leaving the country – something it shares with a good many emerging countries at this juncture – and the direct effect it is having on the U.S. Treasuries market. China is selling Treasuries to offset capital flight and a rapidly weakening yuan. Bloomberg is reporting today that global bonds are suffering their worst monthly meltdown ever with $1.7 trillion in capital evaporating from the international asset pool. [LINK] That’s a major number and a major concern for the incoming Trump administration even as Wall Street parties-on like nothing unusual is going on.
(3) The scary part of this is that the Fed may have already lost control of interest rates. China, Japan and Saudi Arabia, three of the largest holders of U.S. Treasury paper, are now net sellers of U.S. government paper – a trend more likely to gather rather than lose momentum. Obviously, we are already talking about some very big numbers, so where do we go from here?
