The Second Round of Currency War

Currency War

In these days of currency war, with the U.S., Japan and Eurozone devaluing their currencies, it seems that Japan is wining as the Japanese Yen reached an all-time low against the U.S. dollar. This aggressive devaluing of currency from Japan, a major Asian market, seems to provide the gold bull the support it needs against the bear attacks. The first round of the current war started in December 2012 where Japan won by a few points-lead.

The Asian market may be wiser; they still trust gold and buy it whether it is physical or e-gold. They know inflation rates are souring all over the world, and they sense a price bubble is forming in the world business currency, the USD.

Asians are aware that their governments are in war, and their aim is to devalue their currencies and increase exports. Even if they don’t talk about it much, their actions reveal the pure instinct they have. They hedge their wealth through buying gold jewelry and coins. It’s a win-win situation for them. If currency devaluing succeeded, they’ve already hedged with gold. If not, the government increased its gold reserve while depleting the western world stock of gold. Even if massive buying in the Asian market is mainly from the crowd, the government could always buy it cheap from them.

On the other hand, Eurozone have a subtle way to devalue its currency, and they are doing it good. News about south European countries defaulting did the trick. It may be a cheap trick, sacrificing unwelcomed countries in the Eurozone for the richer North, but it’s still a good one.

The U.S. found itself between two fires, the internal affairs of the country, and the world economic madness. The U.S. citizens don’t want to devalue their currency, but the government has to do it to go with the strong current events in the world. Not to mention the headache of emerging economies and the danger Iran pose on the American administration. At the same time, the recession had its toll and the past currency war that started in 2005 with china drained the American eagle. The American administration is confused, and they didn’t make their mind yet. To do what they must do, or fulfill the Americans wishes in strengthening their national currency.

Bottom line, the Asian market supports gold, either by devaluing currencies, or physical buying of the precious metal. While the American market is still confused, they buy physical gold coins, and support the strength of the USD by revealing data of a strong economy.