{"id":14422,"date":"2025-01-29T08:53:16","date_gmt":"2025-01-29T08:53:16","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2025\/01\/29\/robert-sinn-gold-to-benefit-as-us-china-relations-face-turbulence\/"},"modified":"2025-01-29T08:53:16","modified_gmt":"2025-01-29T08:53:16","slug":"robert-sinn-gold-to-benefit-as-us-china-relations-face-turbulence","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2025\/01\/29\/robert-sinn-gold-to-benefit-as-us-china-relations-face-turbulence\/","title":{"rendered":"Robert Sinn: Gold to Benefit as US-China Relations Face Turbulence"},"content":{"rendered":"<\/p>\n

The last decade has been tumultuous, with widespread instability deepening the divide between east and west. <\/strong><\/p>\n

In his talk at this month\u2019s Metals Investor Forum in Vancouver, BC, Robert Sinn, senior content creator at Goldfinger Capital, examined the current macroeconomic situation and the role he expects gold to play in it. <\/p>\n

Highlighting how China\u2019s strong gold buying has supported the yellow metal\u2019s price, he also spoke about how Donald Trump\u2019s return to the White House could impact relations with the Asian nation.<\/span><\/p>\n

\n

China and US economies in chaos <\/h3>\n

In the weeks before his inauguration, Trump discussed several issues with his counterparts around the world. Perhaps most notable was his talk with Chinese President Xi Jinping. According to tweets and reports from the Chinese government, the discussion between the global rivals was friendly and positive.<\/p>\n

The messaging was encouraging to financial markets and helped strengthen the US dollar.<\/p>\n

However, Sinn told the audience that he doesn\u2019t see this positivity lasting long.<\/p>\n

\u201cI don\u2019t think it\u2019s going to be like this forever. I think that they\u2019re going to definitely go head-to-head, toe-to-toe \u2014 try to get the best deal for their country,\u201d he said, noting that an adversarial turn is likely. <\/p>\n

Describing the two economies, Sinn said they are both volatile, but at different ends of the spectrum.<\/p>\n

China is still reeling from its economic implosion and dealing with high levels of debt and deflation, but Sinn believes the situation is much worse than the data being presented to the world states.<\/p>\n

\u201cThey can\u2019t really fake up the bond market that much. So this is a telling story, an economy that is in a downturn \u2014 there\u2019s just too much debt, and price levels are falling and so are bond yields,\u201d he said.<\/p>\n

Sinn also pointed out that the Chinese economy is very unbalanced. The country has the largest banking system in the world, US$50 trillion larger than the US. However, it still hasn\u2019t recovered from the implosion of its real estate sector, and the recovery is slow because it\u2019s a highly regulated market with strict government controls.<\/p>\n

Meanwhile, in the US, Sinn noted that following the US Federal Reserve\u2019s 50 basis point interest rate cut in September 2024, bond yields came off their longest inversion in history, which lasted 24 months. <\/p>\n

He also explained how this came alongside an overvalued US dollar.<\/p>\n

\u201cIt\u2019s actually the most overvalued it\u2019s been since 1985, so this is like a 40 year high in terms of its valuation. You can go back to 1985 and what happened shortly after \u2014 it got super overvalued and hit up a red-light level. It fell very sharply because of what they did in Manhattan at the Plaza Hotel,\u201d Sinn said.<\/p>\n

He was referring to the Plaza Hotel Accord in September 1985. At that time, representatives from several European nations and Japan met in New York with members of the US Department of the Treasury to discuss the depreciation of the US dollar and to correct trade imbalances between nations. <\/p>\n

The move was largely successful, and trade was balanced over the next five years.<\/p>\n

Sinn suggested that something similar may be about to occur, leading to considerable uncertainty. The US is further challenged by a massive US$2 trillion deficit and US$7 trillion worth of debt that needs refinancing in 2025.<\/p>\n

However, he expects the US to extend the 2017 tax cuts made under Trump. This will require the US to commit to more deficit spending, and Sinn sees a squeeze on the dollar coming.<\/p>\n

\u201cTrump sees this problem, his team sees this problem, and one of their key objectives is to weaken the dollar during his term. Trump is pro-growth; he wants to see the stock market go up and the economy strong,\u201d he said.<\/p>\n

Trump\u2019s promises to raise tariffs on China have countered this, and Sinn doesn\u2019t see this happening \u2014 at least not immediately. \u201cChina and the US need each other,\u201d he noted.<\/p>\n

Both nations have cards to play. The US knows the position of the Chinese economy, and the threat of US tariffs may be enough to get the country to the table on new agreements.<\/p>\n

\u201cTrump knows he has the upper hand, but he also knows he can\u2019t set the bomb off, because it will hurt him too,\u201d Sinn said. \u201cHe wants to put 60 percent tariffs on the table. That\u2019s the starting point; if that happens, it\u2019s going to be a mess.\u201d<\/p>\n<\/div>\n

\n

Gold is China\u2019s trump card <\/h3>\n

As a monetary metal, gold is often linked to what happens through the rest of the financial system. <\/p>\n

When yields rise, gold falls, and when the dollar rises, gold falls. However, recently the price of the yellow metal has diverged from these traditional influences. Sinn credits this divergence to strong buying from central banks, most notably China, but also other BRICS nations. He believes China may be buying more than it is reporting. <\/p>\n

\u201cSo China\u2019s official stockpile is 2,300 metric tons, about US$200 billion of gold. I would estimate that their real stockpile is probably closer to 6,000 or 7,000 metric tons, near parity with the US,\u201d Sinn said. He explained that China ramped up its purchases in 2022 following Russia\u2019s invasion in Ukraine and the sanctions that followed.<\/p>\n

It\u2019s unclear what China plans to do with its huge gold stockpile, but Sinn thinks Trump may force its hand.<\/p>\n

\u201cTo get out of this mess, China is going to have to do something with its currency. They\u2019re going to either have to revalue higher or devalue. It\u2019s not that clear what they\u2019re going to do,\u201d he said. <\/p>\n

The preference for China isn\u2019t to devalue the yuan, and it\u2019s Sinn\u2019s belief that the Trump administration doesn\u2019t want that either, as it would further deepen the existing crisis. So what is the plan?<\/p>\n

\u201cThey\u2019re going to revalue the yuan higher against the dollar and they\u2019re going to do a partial peg to gold,\u201d he said. <\/p>\n

However, Sinn also explained that China needs to be cautious when doing this, as it could create further problems for debtors and push the price of gold higher. To avoid this, the shift in yuan valuation would have to be accompanied by a massive stimulus injection and force inflation into the economy.<\/p>\n

\u201cIt\u2019s the big button on the table that you press when you have no other choice, and it will appease Trump,\u201d Sinn said. <\/p>\n

He thinks this also explains the rise in the gold price over the past month and the last couple of years. <\/p>\n

Sinn expects China\u2019s gold buying to continue as the country works through trade negotiations with the new Trump administration \u2014 and that the story is far from over.<\/p>\n<\/div>\n

Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.<\/strong><\/p>\n<\/p>\n

This post appeared first on investingnews.com<\/div>\n","protected":false},"excerpt":{"rendered":"

The last decade has been tumultuous, with widespread instability deepening the divide between east and west. In his talk at this month\u2019s Metals Investor Forum in Vancouver, BC, Robert Sinn, senior content creator at Goldfinger Capital, examined the current macroeconomic situation and the role he expects gold to play in it. Highlighting how China\u2019s strong […]<\/p>\n","protected":false},"author":0,"featured_media":14423,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-14422","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/14422","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=14422"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/14422\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/14423"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=14422"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=14422"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=14422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}