Information and People For Diligent Outcomes
Monday, August 15, 2016
Demand for Silver pushes expectation to $21.35 for 2017
Here's an interesting
note from JP Morgan in Dow Jones Newswires. "Strong growth in China's
solar sector is ramping up demand for silver, says JPMorgan, driving a
40% 1H increase in Chinese silver-powder imports. Solar-capacity
installations there tripled from a year earlier in the period, helping
ease concerns about a lack of industrial demand for the precious metal.
Based on photovoltaic consumption and a bullish outlook for gold,
JPMorgan boosts its 4Q average-price forecast to $21.21/ounce and sees
$21.35 for all of 2017."
Sunday, August 14, 2016
Will there be an IMF October Surprise
On August 19, 2015 the IMF Board approved an extension of current SDR (special draw right) currency basket until September 30, 2016.
Will the IMF change the makeup of its special drawing rights (SDR) calculation for reserve currencies on Friday, September 30? Will the USD fall?
It’s really about China more than it is about the US dollar (unless, of course, you’re reading between the lines and predicting that this is a first step in the IMF taking over global currencies — which is a conspiracy theory line of thinking. Conspiracy theories are not necessarily wrong every time, but they rarely make for good investment strategies).
The SDR is a derivative reserve currency created by the IMF to try to diversify global reserve currencies, and to some degree that’s intended to lessen the reliance on the US dollar as the single reserve currency — though it’s not new. The SDR has been around since the late 1960s, and was originally based on gold and the US dollar (since major currency exchange rates were still fixed back then, under the Bretton Woods postwar system that collapsed a couple years later). Now, I’d describe the SDR as an attempt to have a global reserve currency that’s more representative of global trade flow and economic power — it exists as a currency, sort of, in that countries can exchange it and it’s occasionally used in some exchange rate calculations, but the most widespread use has been the 2009 attempts to bolster some economies whose balance sheets were in trouble, and opinions are that the only real value of the SDR is that it can be exchanged for the currencies that make it up.
Currently, the SDR is made up of the U.S. dollar (41.9%), euro (37.4%), Japanese yen (9.4%), and pound sterling (11.3%). As of October 1, in a move that was announced last November but delayed a bit to allow more time for the Chinese Yuan to become more freely tradable, the makeup will be: U.S. dollar relatively unchanged at (41.73%), and weightings for the euro (30.93%), yen (8.33%) and pound (8.09%) fall to make room for a 10.92% slot for the Chinese currency.
Will the IMF change the makeup of its special drawing rights (SDR) calculation for reserve currencies on Friday, September 30? Will the USD fall?
It’s really about China more than it is about the US dollar (unless, of course, you’re reading between the lines and predicting that this is a first step in the IMF taking over global currencies — which is a conspiracy theory line of thinking. Conspiracy theories are not necessarily wrong every time, but they rarely make for good investment strategies).
The SDR is a derivative reserve currency created by the IMF to try to diversify global reserve currencies, and to some degree that’s intended to lessen the reliance on the US dollar as the single reserve currency — though it’s not new. The SDR has been around since the late 1960s, and was originally based on gold and the US dollar (since major currency exchange rates were still fixed back then, under the Bretton Woods postwar system that collapsed a couple years later). Now, I’d describe the SDR as an attempt to have a global reserve currency that’s more representative of global trade flow and economic power — it exists as a currency, sort of, in that countries can exchange it and it’s occasionally used in some exchange rate calculations, but the most widespread use has been the 2009 attempts to bolster some economies whose balance sheets were in trouble, and opinions are that the only real value of the SDR is that it can be exchanged for the currencies that make it up.
Currently, the SDR is made up of the U.S. dollar (41.9%), euro (37.4%), Japanese yen (9.4%), and pound sterling (11.3%). As of October 1, in a move that was announced last November but delayed a bit to allow more time for the Chinese Yuan to become more freely tradable, the makeup will be: U.S. dollar relatively unchanged at (41.73%), and weightings for the euro (30.93%), yen (8.33%) and pound (8.09%) fall to make room for a 10.92% slot for the Chinese currency.
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