Good morning ORG !

Thank's for the reference . We talk to lenght about the future value of gold all through the year and most of us agree it will keep climbing , to what extent going forward i'm not sure , most here agreed some months ago $1200 to $1300 was foreseeable before year end , and we seem to be getting there .

Now as we near the corner the same question is haunting us for obvious reasons . As i remember last january or was it rather last december Merryl Lynch predicted gold would hit $2000 before year end , well not quite but the base of their argument steamed from the outlook for the US and world economy and the US dollar downfall to come .

For their defense we must admit everybody was a bit more pessimistic at the time ( i'm sure you'll have something to say about this eh ? ) 2010 is now starting to look us in the eye and we still wonder about same , gold, dollar, oil, the trend of the economy and the markets cause we're betting our stakes in the future and some of us even our a.. into it . I'll be carefull and maybe cheap in doing so but i'd say $1500 is a fair bet and this may happen early on cyclical or at the latest before next summer , past that point i'm realy not sure what will happen with gold . I'd be very happy to be wrong and see it go up to $2000 but i won't wait it up to that point before acting on my investments in gold or silver.

Now back to the previous argument about the yuan .

The reason why i don't see the US dollar falling like a rock is based on the assumption that most holders of the Us dollar have too much too loose to let it fall in a spiral . We both know the position of the Canadian govt. on this yet Canada is a small player on the currency market but other major player such as Japan , China the euro zone as well as Russia and India are holding major stakes in US dollar that far outstretch the amount of gold available in the world even if it were valued at twice the actual price , so i don't see how they could hope to trade their holdings in US dollar for gold even if it were possible to do so without creating a major panick and precipitate the US dollar to the ground and frankly i doubt anybody could win in doing so .

China is said to hold nearly $900 B in US bonds and altogether nearly $1.4T of it's reserve in US denominated $ Japan holds nearly as much US bonds as China way over $800B , i believe Russia as nearly 45% of it's hard currency reserve in US dollar ( correct me if i'm wrong here ) India also holds a large stake of US dollar even after it's recent deal for the 200 t. of gold for wich some say they use US dollar to buy the gold . I could'nt out of memory mention the stake in US dollar for Germany Britain France or Italy but we know they're also holding US debt or currency or equities invarious amount .

The fact is everybody and it's brother as the disease to a certain degree and as we discussed here before everybody stands to loose if the dollar falls too quickly , that's why i think they have no choice but to support it and most then anybody else the chinese .

But China is also very dependent on their export to the US and yet very aware that the yuan valuation is a major problem in the US as well as internationaly . As was stated in Clavis post even outside the euro zone some countries are now applying pressure on China to let it's currency fluctuate and as we saw recently Brazil among others started to act on it's currency by applying taxes on the inflow of money getting into the country to realief some of the pressure applied on the Real .

My point is pressure is mounting from all sides on China to increase the value of the yuan either through political statements or through protectionism measure aimed at China's export and it's been mounting most of the year , that's why i believe China will have to do so , and they will want to time this in a way that it seems that they're acting on their own decision and time yet in manner that reflects their commitment to be a full participant to the international commercial order and also in a manner that permits them to claim that they got something in return ( it's all about face isn't it ) .

That's why i figure they will let some of the dust from recent events settle down and try to adjust their intervention in order to safeguard their stake in the US dollar wich they accumulated through hard work , i don't think they can afford to see their "war treasure" go to waste it would be a political suicide and a major set back for China's economy .

They can afford to witness the US dollar loose some of it's value but in the long run they have to hope and work to maintain the value of the dollar so as not to loose the value of their holdings , if they could get out of the US dollar in a flash without loosing big time in the process i'm sure they would do so and others would do the same as wel but we well know that's not possible , it's like seeing your major investment in jeopardy after having lost part of it and knowing that by trying to sell your stake in the stocks you'll set a panick that will send it crashing down while not even being able to get out of it totaly .

In other words they're stock with it and have to hope for the best while trying to figure a way out at crawl's pace .

Wish you a good week end Org

Regards!

Tec