The US Petro Dollar Breakdown Continues: Big Moves in Gold and Silver Ahead
The comments above & below is an edited and abridged synopsis of an article by Steve St. Angelo
The US petrodollar’s role as the world’s reserve currency is ending. Unfortunately, most Americans don’t know that when the dollar loses its reserve currency status, life will become harder.
Key support for the USD index is at 92.5. It could mean trouble if the dollar closes below that level, which looks like it will happen this week.
One reason for the falling dollar could be that the 10-year note has been below the fails rate and shows no signs of moving. The pressure on the US Treasury 10-year repo market is likely a reaction to the recent BRICS summit, and Putin’s “Fair Multipolar World,” where oil trade bypasses the dollar.
The announcement by Putin that oil trade should by-pass the dollar came after China announced that it plans to trade oil on the Shanghai Exchange in yuan, which will be backed by gold.
This gives countries the confidence to trade oil in a fiat currency besides the dollar. Countries that acquire a lot of yuan by trading oil don’t have to worry about devaluation, as they can convert yuan into gold. This is bad news for the Saudi petro dollar system.
So both Saudi Arabia and the petro dollar are under severe stress as the low oil price guts the highly leveraged debt-based global economy. The notion that the US shale oil industry will allow the US to become energy independent from Saudi Arabia and other Middle East oil exporters is nonsense; it is in trouble as well.
China’s announcement that it will start trading oil in yuan backed by gold is the death-knell of the petro dollar system, and its end will cause precious metals prices to soar. Investors who have not taken a position in physical gold and silver should do so, as China’s announcement to trade oil in yuan backed by gold was warning that the days of the US dollar world’s reserve currency status are ending.