Further Implications of the Chinese Devaluation of the Yuan

China and the US remain tied at the hip on monetary policy.

There have been several reactions to the Chinese devaluation of the Yuan. Many experts are focused on Chinese attempts to increase their exports to the global market. However, a closer examination of the metrics driving Chinese growth would indicate that it is more likely related to Dollar denominated loans, over $1 trillion, held by Chinese companies. The USD rally has put more pressure on Chinese companies in order for them to meet servicing payments on these loans. I expect further action by the Chinese as they work to normalize their markets and attempt to secure reserve currency status for the Yuan. These actions have the potential to impact Gold, a market investors should keep a careful watch on.

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Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the author only. There can be no assurance that developments will transpire as forecasted and actual results will be different. Accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.