American-made weapons will soon be destined for Taiwan, US lawmakers tell Taiwanese President Lai Ching-tesending shockwaves of uncertainty through electronics and metals markets this week.
As part of a targeted “celebration” of Lai's recent inauguration, Chinese military aircraft and warships conducted large-scale exercises around the island. China considers Taiwan a wayward member of its territory and does not rule out the use of force to assert its claims.
“China will surely be reunified,” Chinese President Xi Jinping said in his speech. New Year's speech. “Compatriots on both sides of the Taiwan Strait should be bound by a common goal and share the glory of the rejuvenation of the Chinese nation. »
Michael McCaul, Chairman of Foreign Affairs of the United States House of Representatives, told Fox that the recent Chinese protests are the most “provocative” yet. If China attacked Taiwan, McCaul predicted during his visit to the region, “it would make Iran shoots at Israel looks like child's play.
“I think at the moment we’re probably going to lose,” he said.
One likely casualty of such a conflict would be Taiwan's semiconductor industry, which owns approximately 70% global market share. The total value of the industry is expected to set a record this year at $630 billionBut that could change if China invades Taiwan and, as McCaul warns, “the island does not have the capacity to defend itself” or its industry.
“Everyone who has phones, cars – we have advanced weapons systems – it's all about semiconductors and this island, over time, because we've offshored (manufacturing),” McCaul told Fox News Digital. “And stopping what’s happening (in Taiwan), semiconductors, would really shut down the world.”
Changes in the semiconductor market are driving changes in the market for many base metals, including silicon, germanium, and gallium, all of which are critical components for the manufacture of semiconductors. Gold is also a key part of the production process due to its anti-tarnish properties.
A semiconductor shortage could lead to other electronics shortages, squeezing markets for everything from refrigerators to cell phones to electric vehicles. There is precedent for such upheaval, which occurred during the semiconductor shortage linked to the COVID-19 pandemic – and at the time, the economic pandemonium did not stop at electronics General public.
“The recent semiconductor shortage is not a distant problem: it affects ordinary citizens around the world,” the report said. The Council on Foreign Regulations reported Last year. “Supply chain challenges can lead to price increases for consumers and job losses for manufacturers. Companies laid off thousands of workers (during the COVID shortage) because the US was running out of chips.
Such a decline in semiconductor production might initially appear as a sign of a decline in demand for metal components, such as gold. This seems to be the market's immediate intuition, as shown Gold prices fell slightly after Chinese exercises – but a major complicating factor quickly becomes apparent. China, already one of the the largest consumers of gold in the worldis busy buy the precious metal at record rates. The country's aggressions toward Taiwan will likely continue to drive up precious metals prices, signaling a second precious metals boom when coupled with the growing market uncertainty and inflation that inevitably follow conflict.
“China definitely drives the price of gold,” said Ross Norman, chief executive of MetalsDaily.com. told the New York Times. “The flow of gold into China has gone from a massive flow to an absolute torrent. »
Some experts suggest consolidating precious metals stores This could be a sign of preparation for greater Chinese military involvement in Taiwan and a growing avoidance of ties to the US dollar, which could be sanctioned in response to Chinese aggression. In short: China is betting on gold, not the dollar.
“There is absolutely no doubt that the timing and sustained nature of (China's gold) purchases are all part of a lesson that (the Chinese) learned from the war in Ukraine,” said Jonathan Eyal, Associate Director of the Royal United Services Institute of the United Kingdom. , told the Telegraph. “The incessant purchases and their quantity are clear signs that this is a political project that Beijing's leaders are prioritizing because of what they see as an imminent confrontation with the United States.”
“If (China) gets much closer to bullying Taiwan and countries start moving their investments out of China, (the gold reserves) will give them a little bit of breathing room to be able to overcome some difficulties,” added Sir Iain Duncan Smithco-chair of the British Inter-Parliamentary Alliance on China.
At the same time, the president signed an $8 billion aid package for Taiwan and the surrounding region, a move that worsened relations between the United States and China and will encourage economically painful sanctions on both sides. Such expenses could also pull the trigger on domestic inflationleading to a continued weakening of the US dollar even as the Chinese economy is strengthened by its gold reserves.
This type of monetary policy is why some economists, including Danial Lacalle of IE Business School in Madrid, are sounding the alarm about government inflation being used as “policy and not coincidence.” In this environment, Lacalle warnsIt's a bad idea to bet on an inflated currency when choosing investments.
“Staying in cash is dangerous; accumulating government bonds is unwise; but to reject gold is to deny the reality of money,” Lacalle said.
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