WEEK END BLOG – China, Gold and Bitcoin

Although we can be certain that Chinese economic growth will be between 7% and 7.5% this year, the way we get there is very uncertain. Recent macro data have been very poor, resulting in a massive plunge in the Citi economic surprise index. We have to go back to the start of the financial crisis to find these kinds of numbers. Chinese growth is slowing down in an uncomfortable pace.

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Investors did not show their doubts, however. In recent weeks emerging markets have cautiously made op some of the lost ground to developed markets. But, we have seen these upticks many times before, so don’t get too carried away, yet.

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Strong speculations this week about a possible round of quantitative easing by the ECB after Bundesbank President Weidmann stated that a QE program is not out of the question.

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Now, there are lots of ways to do QE, but they will probably all lead to a significant depreciation of the euro. For more on this topic, please read my blog post. Also, QE by the ECB would probably lead to an even greater yield gap between the US and Europe.

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Gold had a rough week and fell though the 1300 barrier again. Gold has lost almost 7% of its value during the last two weeks and has not brought much fortune to investors in recent years.

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But if you think gold was a bad investment, just take a look at gold miner stocks. Way worse!

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Finally, bitcoin also had some troubles this week. There was a mini crypto crash as bitcoin briefly dipped below USD 500 on coinmarketcap.com. More regulation coming from China and the ongoing aftermath of the Mt. Gox debacle resulted in downward pressure.

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