I have made no secret of the fact that I am most concerned about a wave of credit/debt issues coming to China sooner rather than later. As a matter of fact, Dr. Copper has been accurately forecasting this for longer than many of the so-called expert analysts.
While I view this development as a deflationary force globally, which should pressure certain key commodity markets, it also seems to be one of the factors bringing some safe haven buying into the gold market at the current time.
My own view is that if there were another deflationary wave that might threaten to engulf the world economy again, gold would struggle in such an environment. This view is based off of what happened to the metal during the outbreak of the credit crisis here in the US in the summer of 2008.
However, back then the Dollar was the recipient of strong safe haven flows. Thus far we are not seeing that and that is why gold continues to remain resilient in the face of these deflationary news. For now, gold is benefitting from nervous equity investors seeking a safe haven from unsettling winds that are buffeting the global economy.
Here is the headline from the article I suggest you read:
China's Li Keqiang warns investors to prepare for wave of bankruptcies
World's second largest economy is facing 'serious challenges' and many companies with high debts are being forced to the wall
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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