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You wouldn’t expect the ripples to have spread quite this far, but Britain’s Brexit from the E.U. is lapping on the shores of the South China Sea and has forced the People’s Bank of China (PBOC) to intervene to “stabilize” the yuan in the face of a slump in the pound and euro and a surge in the U.S. dollar.

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Chinese policymakers have guided the yuan to a 5.6% decline against an index of its trading partners this year as exports fell every month apart from March. The 13-currency gauge fell to a 20-month low last week as the PBOC continued its policy of “stability” while maintaining responsiveness to market forces — plainly such a policy can be contradictory at times, especially in times of volatility as we are now facing.

Source: Bloomberg

Source: Bloomberg

The PBOC, after years of gradual appreciation, has presided over a period of depreciation again in an attempt to help exporters, but an unexpected downward adjustment last August spooked markets and caused shares to fall causing an estimated $1 trillion capital outflow from the country as investors panicked, fearing the prospect of their assets falling in dollar values. (more…)

Gold prices hit a two-year high after the U.K voted to leave the European Union. Brexit has been doubly positive for the yellow metal.

Gold surges to a 2-year high following Brexit. Source:stock charts.com

Gold surges to a two-year high following Brexit. Source: @stockcharts.com.

Stock Markets Sell-off

Nasdaq Composite Index heading south. Source: stockcharts.com

The NASDAQ Composite Index heading south. Source: @stockcharts.com.

We already warned on June 1 that a global sell-off in stocks was on the table and that this would make investors rotate money from stocks to gold.

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Brexit was enough to shake markets and trigger a panic-driven stock market sell-off. Investors looked for safe-havens like gold, the Japanese yen, Swiss franc and bonds. Gold prices will continue to gain if markets get uglier, which we see as likely. (more…)