China's central bank sees strong commodities, weak dollar

Section:

By Langi Chiang, Kevin Yao, Aileen Wang, and Simon Rabinovitch
Reuters
Friday, March 25, 2011

http://www.reuters.com/article/2011/03/25/us-china-economy-overview-idUS...

BEIJING -- Loose monetary policies in developed economies will place more upward pressure on global commodity prices and weigh on the dollar this year, the Chinese central bank said on Friday.

In a report reviewing the performance of global financial markets, the People's Bank of China also warned of a deepening of the European debt crisis, though its broad view was colored with optimism.

"We expect that the world economy will keep recovering, and the foundation for the recovery will be firmer," it said in the 125-page report.

In a brief discussion of risks, it pointed to Europe's debt woes as well as inflation and the potential for asset bubbles in developing markets.

... Dispatch continues below ...



ADVERTISEMENT

The Gold Standard Now: It Can Work

Today a dollar is worth 80 percent less than it was 40 years ago, and less than 5 percent of its value a hundred years ago. We deserve a dollar that is as good as gold, a dollar that will hold its value from year to year so we can be financially secure and our economy can generate more and better jobs.

For most of America's history, our dollar was literally as good as gold. But on August 15, 1971, our politicians destroyed the link between gold and the dollar. They destroyed the foundations of our economic system.

A new Internet site, TheGoldStandardNow.org, provides news and cutting-edge analysis about this most important issue and explains how the gold standard worked in the past and how it can work in the future. Visit us today:

http://www.thegoldstandardnow.org/about/137-welcome-newsmax



On balance, however, it said that the dollar would fare worse than the euro.

"In 2011, the dollar will be on a downward trend overall, because of the slow recovery of its economy, low interest rates and twin deficits," the central bank said. "The possible spreading of European sovereign debt crisis and geopolitical risks may push up the dollar in some periods."

It noted that short-term interest rates in major economies would gradually rise as their recovery solidifies.

"But as the global recovery momentum is not strong, the increases will not be too large," it said.

Looking at global commodities, it said that wealthy nations were printing money to kick-start their economies and this would inevitable push up prices.

"Developed countries will continue with their loose policies and global liquidity will remain ample, which will keep prices of commodities, especially crude oil and grains at high levels," it said.

Concerns about inflation would trigger demand for gold as a store of value, but the precious metal's bull run may be near its end, it added.

"We need to note that gold prices have reached historical highs, and its downward risks should not be overlooked," the central bank said.

It said the global recovery depended in large part on coordination between major economies.

"All countries should avoid competitive devaluation of their currencies and pay more attention to risks brought by excessively loose policies on the back of a global recovery," it said.

The central bank reiterated that China would make its currency more convertible under the capital account, a long-standing pledge that has resulted in only incremental progress so far.

"We will relax restrictions on cross-border capital transaction activities in a selective and step-by-step manner, making sure that all risks are effectively under control," it said.

* * *

Join GATA here:

An Evening with Bill Murphy and James Turk
Sponsored by Deutsche Edelmetall-Gesellschaft
Friday, April 29, 2011
Hofbrauhaus, Munich, Germany

http://www.goldmoney.com/munich-2011-april-29.html

Support GATA by purchasing gold and silver commemorative coins:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:



ADVERTISEMENT

Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit:

http://prophecyresource.com/news_2011_jan18.php