Tuesday, January 12, 2010

Bullish Talk From PRC Investment Official...About The Greenback

According to a report in the Economic Times Online, an investment strategist at the China Invesment Corp. (which controls $300 billion in assets) thinks the U.S. dollar has bottomed:
The comments by Peng Junming, who works in the asset allocation and strategic research department at sovereign wealth fund China Investment Corp, triggered a rally in the dollar. "I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further," he told an academic forum.

"The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades."
He had this to say about gold and the push in the PRC to own it:
Peng was explicit in his view on gold: "China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high." He defended US Treasury investments, arguing they had offset losses in stocks and helped swell currency reserves in 2007 and 2008.
It does sound like the fellow's defending an earlier recommendation to stick with U.S. Treasury securities, but his voice carries weight in the PRC investment community. The fund itself has done well recently by investing in PRC banks, which are being restrained somewhat by a just-announced reserve-ratio increase. There was no indication in the story that the China Investment Corp. has any significant investments in gold or the gold sector.

Moving to the other side, an explicitly bullish call on gold notes that U.S.-PRC tensions could push the metal's price up:
China's testing of a missile interceptor is expected to further strain relations with the US and comes at a time of increasing monetary and trade tension with the U.S. having imposed a tariffs on Chinese and on Chinese steel products last week. Increasing threats to global free trade may lead to a safe haven bid for gold.
Although hedged with the word "could," the writer of it does believe that gold will reach $1,200 by the end of this month. However, there was no hint that the November high will be bested in that timeframe.

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