The Golden Yuan and what it means for precious metals

The central currency of china, the yuan, is becoming more widely accepted and traded for in the global economy. With China’s ever increasing economic growth they are looking to de-Americanize the global economy. There are a few opposing viewpoints on what china is going to do, and if it would be possible to back their currency with gold. The total amount of gold in the world is now estimated to be valued at 9 trillion dollars, china currently owns approximately 110 billion worth of that in physical gold. Even if china was to acquire every ounce of gold in the world, they could only back 49.5% of its total currency, so what does this mean? In my opinion with china being a very large producer of gold, as well as buying it feverishly, the value of gold as well as everything tied to it can only go up.

There is more than one way precious metals go up in value, demand can go up, which it is, or the currency they are being purchased with can go down in value. If the Yuan becomes the new reserve currency you can expect the relative value of the dollar to go down and the price of precious metals to rise. Combine increased demand and the currency issues and you have a volatile situation.

There are several scheduled meeting to discuss the possibility of backing the yuan with gold, as soon as the 10th and 11th of april, so expect to hear some new news about this topic soon enough.

Bookmark the permalink.