Gold 1783,50
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EURUSD 1,2031
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DJIA 33660,50
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OIL.WTI 62,225
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DAX 15173,50
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In 2018, China launched a gold-backed futures contract for oil in renminbi. This was done to see how attractive the renminbi would be as a reserve currency, which China has long wanted to counter the US dollar. A fortnight ago, the IMF reported that the global share of global foreign exchange reserves denominated in US dollars had fallen to 59%, a 25-year low since 1995. How do you wonder what China is doing now?
Gold
Just last week, China announced that it is launching a “digital yuan” very soon. Firstly, this makes China a pioneer in the world of digital currencies, far ahead of other countries. Second, the digital currency is likely to be backed by gold, making it a very strong financial instrument.
The People’s Bank of China has always controlled the amount of gold imported into the country. More recently, China has allowed all banks to import large amounts of gold, increasing their quotas many times over. Such news primarily affected the growth of gold. There are reports that China will buy USD 8.5 billion worth of gold in April and May.
Apparently China is already planning an operation to take over the reserve currency market. To do so, China needs to frame the US dollar, try to sell all US debt and bring the yuan to the forefront. It’s a complicated scheme, but it’s doable.
The dollar problem scenario is most likely to include a nascent inflation in the US. When the dollar falls hard in stock markets, Chinese financial instruments will be used to push up the inflationary mechanism in the United States and reduce confidence in the dollar. After all, the holder of huge US debt could easily manipulate these finances.
Given the complexity of the process, the possibility of a severe global financial crisis that would be worse than the problems of 2008, with the resulting collapse of the global financial system, is not out of the question.
As a consequence, China will have to ensure the security of its own currency and revert to the gold backing of the renminbi. Therefore, gold is likely to be bought now in order to make the RMB surplus available for the whole world public, already stable and secured in gold. In addition, a “digital RMB” backed by gold could be offered. Such an asset could rival Bitcoin in popularity in the future.
If everything goes according to plan in China, the price of gold will continue to rise, because China will need a very large amount of the precious metal for realization of all the plans.
08.00 UK consumer price index for March
12.30 Address by Governor of the Bank of England E. Bailey
16.00 Bank of Canada interest rate decision
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