China's Golden conspiracy is a likely taleby Ivan Tong
The worsening geopolitical situation has become a non-event to the gold price movement.
Alongside the gold conundrum, there is now an American conspiracy theory that China is intervening in the gold market by
[b] shorting COMEX to suppress the price of gold. [/b]
The theory is that China is intervening because it does not want the devaluation of the yuan to further weaken its purchasing power, as a weaker yuan is a major weapon in Beijing's trade battle against the United States.
If this were true, the trend of yuan against the US dollar will be in tandem with the trend of the price of gold in the short term. In another words, the trend of yuan against the US dollar will be an important benchmark to evaluate the movement of gold.
Alex Mooney, a member of the US House Financial Services Committee, accused the Federal Reserve and US Treasury of evading his questions about their activities involving America's gold reserves after writing letters to them, and said that China was secretly intervening in the gold market and manipulating the US currency market.
The theory that China is suppressing the price of gold is just a conspiracy theory at the moment. However, it is likely to gain more credence until the close link between the yuan and the price of gold gets broken.
Gold has fallen to nearly US$1,200 an ounce. If analysts are right, it will be dangerous once it falls below US$1,196, but it is hard to predict how low gold will go.
However, even if the conspiracy theory did not exist, uncertainties such as rising interest rates and rising inflation are also hurting the price of gold.
Meanwhile, the VIX index, which measures future volatility, has remained flat, reflecting that the market is unafraid of the trade war and geopolitical risks - and that makes the price of gold unpredictable.
At the moment, hedge funds have to short gold and long assets and shares denominated in the US dollar.
If the conspiracy theory is true, it will be much harder for gold to break of out this vicious cycle.
Source: The Standard
http://www.thestandard.com.hk/section-n ... 0808&sid=2
It's all about "how much you made when you were right" & "how little you lost when you were wrong"