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 Replies: 12 / Views: 2,032 |
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Pillar of the Community
United States
5837 Posts |
Latest from Kitco.com Quote:
Could gold, the world's longest running currency be used to create a new order in global currencies? The Chinese central bank is said to be considering backing its yuan with the yellow metal. This move, says Ken Hoffman, Global Head of Metals and Mining Research for Bloomberg Intelligence, would be a "game changer." Why would China consider such a move? Hoffman explains that Chinese policy makers are already trying to establish the yuan as a reserve currency, and backing it with gold would help attract foreign capital inflows. China is expected to receive approval from its central bank for a yuan-denominated gold fix, with a potential for an announcement as early as next week. Hoffman explains that a gold standard would not necessarily create a big constraint to the Chinese central bank, as many believe. "It could be at any price they fix. There's a lot of things that they can do to make this work," he says. Hoffman estimates that to create an exchange rate of one ounce of gold for every $64,000, the country would need about 10,000 metric tons of the metal. "That's nine times the nation's official holdings and about 6 percent of all the bullion ever mined globally," Hoffman says. Moving to a gold standard may also be a question of power for China. Hoffman says that when the U.S. adopted a gold standard after World War II, it emerged as the main power in the International Monetary Fund. In 1971, the U.S. ended the use of the gold standard and rendered the dollar a fiat currency. If China decides to go into some form of a gold standard, Hoffman says it would make the rest of the world view the metal as a currency again. "If they go for it, we'd be talking about fireworks," he says. Kitco News, June 25, 2015. If it does happen? |
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Bedrock of the Community
Australia
21788 Posts |
World annual newly mined gold production is typically around 2,500 tonnes per year. Total World production is typically around 3,500 tonnes per year which includes recycling.
It has been estimated that a cumulative total of 171,000 tonnes of gold that been produced for all time.
Gold is the 19th most abundant element in the Earth's crust; it may have a far higher proportion than that in the Earth's iron core, simply because it has a high density.
It's sufficient abundance is one of the reasons why it is useful to back a currency.
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Pillar of the Community
United States
946 Posts |
If this does happen...will this significantly affect the spot price of gold? If china needs that much gold then the price should go up?
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Pillar of the Community
United States
4333 Posts |
I'd better contact Kitco and buy some gold today!
When I listen to LED ZEPPELIN...so do my neighbors...
Roll hunting since '77
Dirt fishing since '72
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Pillar of the Community
 United States
5837 Posts |
This isn't the first time China has tried to establish the Yuan as a reserve currency, but backing the Yuan with gold can certainly help strengthen it, and perhaps raise the price of gold again. China looking at other options besides buying the US debt and properties.
And again, it is only considering!
Edited by macmercury
06/26/2015 06:13 am
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Bedrock of the Community
Australia
21788 Posts |
China is experiencing a severe housing 'bubble' currently.
Could be 2008 GFC all over again, only starting in China this time. That's how the last GFC started in the U.S.
If it does happen, I don't think the introduction of the Yuan as a reserve currency will be able to stop it, gold backed or not.
I can't help thinking that it is just Kitco trying to 'talk up' gold.
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Pillar of the Community
United States
3789 Posts |
NOT going to happen. What this is: typical talking head talking about "what if" and speculation.
Now let us say it does happen in a week. The gold market should have moved 6 months ago. But it hasnt..
so in the end, this means nothing.
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Valued Member
United States
336 Posts |
The talk of China moving to a gold standard has been around for a few years now. China hasn't been showing any strong moves towards it. However over the past couple years the Chinese government has bought up larger than normal amounts of gold bringing the talk even further into the lime light. The Chinese gold exchange has been making its way into the news more often. None of this is a convincing argument that China is headed towards the gold standard as of yet.
Another huge factor to consider is the fact they are talking about "fixing" an exchange rate. History has already shown this doesn't work. Odds are the Chinese government would not make it where the average Joe could exchange his currency for gold or silver. Only large transactions would be allowed. The moment gold increases in value and China doesn't change the exchange rate, large amounts of gold will flow out of China which will force closed the gold window. A gold standard like this one is more smoke "n" mirrors than a true gold standard.
As for an effect on gold prices: if China actually did it, there is no doubt in my mind that there would be a temporary increase in the gold price as well as a temporary decrease in the value of many world currencies in comparison to the Chinese currency, but how long would it really last is the question.
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Pillar of the Community
United States
5837 Posts |
This obviously going to take time IF IT does happen, and the ground work been lay down for the past few years. I think within another few years we will see not just the green back would be the only reserve currency, what is backing the US dollar? Trust can only go for so long?
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Valued Member
United States
336 Posts |
If your prediction about another reserve currency surfacing in the next couple of years is correct, we better brace for some tough inflation in the US.
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Pillar of the Community
Canada
2805 Posts |
Unfortunately the Chinese are too smart to fall for this one.
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Valued Member
United States
493 Posts |
It has not been all to long now that China changed the rule regarding it's citizens right to purchase gold, and they are buying, about as much as India is. That to me is significant, but also shows that the deep pockets know gold offers up some protection against inflation which is rampant. We might not have much here in the U.S., things like health care costs increasing 10% yearly don't count as inflation, that's just greed and monopolistic intentions, i.e. googles and now I'm seeing more acquisitions and mergers, both precursor to tighter times to come as they gang up playing the strength in numbers game.
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Pillar of the Community
United States
808 Posts |
No nation today would accept the limitations on monetary policy that would accompany a metal standard. However, in a crisis, having a large and proven gold reserve could help China's quest for reserve currency status. Especially if they can call into question the validity of claimed US gold holdings. None of this is likely to happen, though. I can't imagine any scenario where anyone is likely to compell the U.S. to provide an independent and public audit of its gold holdings.
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Replies: 12 / Views: 2,032 |
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Posted 06/26/2015 05:46 am
