How China Just ‘Reset’ The Global Monetary System with Gold
The comments above & below is an edited and abridged synopsis of an article by Peter Reagan
China is taking the next step towards dethroning the dollar as the world’s reserve currency, but the strategy behind this move could send gold soaring.
International oil trade is the crux of the issue. For decades, the world’s largest oil importers have paid for oil using the petrodollar, which supports the dollar’s value and fuels US government deficit spending (primarily because the petrodollar is backed by Treasuries).
But now, China is looking to upset the current petrodollar system by introducing gold-backed ‘petroyuan’ oil futures contracts. And since China is the largest importer of oil globally, this massive shift away from the petrodollar could be bad news for the US. But it could be great news for gold owners.
For the first time since the US abandoned the gold standard, physical gold is being reintroduced to the global monetary system in a major way. That alone is incredibly good news for gold owners. But that’s not all.
Given the choice between trading in something backed by Treasuries (which can be created at will from nothing by the US government) or physical gold, what do you think exporters will prefer?
As more and more nations pile into this new gold-backed oil trade instrument, global demand for physical gold will surge, giving gold prices a tremendous upward thrust.
All this is coming at a time when gold already has several bullish price drivers poised to push it higher; China’s new gold-backed oil futures contracts are just icing on the cake.
Reagan discusses building the petroyuan; gold solving petroyuan concerns; the Nikkei Asian Review reports; the good news and the bad news.