China’s launch of yuan gold benchmark means economic powerhouse relying less on U.S. dollar
Last week, China moved itself closer to gold. As the United States debated the $20 banknote, as the European Central Bank (ECB) ramped up its quantitative easing and as the New Zealand central bank announced the end of media embargoes, China’s top banks and gold miners launched a yuan gold benchmark with 18 members.
The 18-member group, which will include the world’s largest jewelry retailer and two foreign banks, will participate in China’s new yuan-denominated gold benchmark. This will help the Asian economic powerhouse inch towards becoming a price-setter for the yellow metal.
It should be noted that a yuan gold fix does not threaten England or America’s gold pricing. However, it enables Asia to have more power in this realm.
China no longer wants to rely on the U.S. dollar for global transactions, and thinks its market weight should allow it to set the price of the precious metal. China is currently the world’s biggest producer, importer and consumer of gold.
Although it doesn’t pose an immediate threat to the West, China is depending on fewer greenback notes. Hao Hong, managing director and chief China strategist with Bocom International, one of the nation’s biggest banks, said it best in an interview with Bloomberg News:
“By trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars…The gold reserve on the China balance sheet has almost doubled since 2009. By holding gold, and moving away from a US-dollar centric system, we actually require less US dollars.”
The People’s Bank of China (PBOC) has been rather quiet about hold much gold it’s hoarding. It published figures last year that said its gold reserves stood at 53.3 million. But some believe that China is understating that number, and it’s actually a lot higher than the reported sum.
Despite the establishment ridiculing Ted Cruz’s allusion to the gold standard and the likes of Paul Krugman and Ben Bernanke chastizing those who view gold as money, it appears China holds this same view: gold is money.