@atomic79.
I have read few different places about this Chinese Yuan/Oil trade funda for few months.
I can tell you it will be a non event. Nothing will change.
Yes international traders can buy oil contracts denominated in Chinese Yuan. So what....and can convert that Chinese Yuan into Gold or Gold contracts. Then......what....!!! Nothing.....
They can just do the same with all contracts bought & sold in US dollars.
If anything Gold might go down that day as people who might have leveraged up to catch a gain on that event will be disappointed and dump their gold.
Until you see a long que in front of a gold bullion shop everywhere....or small booths at the shopping centres with the sign 'Buying Gold ...Cash Payment". The general mass has to engage. Right now that is not happening. Its only few handful of people like you & me who visit the bullion shop now & then buy some silver bars and gold ounces. Rest of the mass would not exchange a silver 1 oz coin for a lollypop.
Yes the World Central Banks have been buying gold.....they are the major buyers in the market.
If that Yuan/Oil/Gold trade would be that big a deal......the New York Bankers would be all over it before anyone else and Gold would have bumped up. The Bankers of New York move the gold market or any other market for that matter.
If you cared to listen FED chairman Jay Powell today he clearly stated they want inflation to run higher than 2%. Which means they want the economy to run hot. To me it means they will continue to raise rates and devalue the currency.(Inflation = devaluing currency). A less buying currency is gold for gold.
The idea which many other gold experts(including Peter Schiff) possess that US has to go into recession for gold to go up is very flawed. The US economy has to be robust for gold to go up. If the US goes into recession, people lose jobs, have little money for their living.........can you imagine anyone in a hurry to buy gold when their biggest concern is daily livelyhood. There will be little money for food & shelter.....where will be money to buy gold.
For people to buy gold there has to be excess overflowing money in the system......which means everyone is doing well....everyone has higher purchasing power.....so more money is chasing the same goods & services....prices goes up causing inflation.....central banks raise rates to tame inflation.......prices go up more as the Central bank raising rates lifts cost all across the board......more inflation.....currency start buys less.....
That's when people tend to buy gold to preserve their purchasing power. I am talking in the WESTERN world.
Things are different in ASIA.
People buy gold whenever they have excess money. It is a form of savings in jewellery.
Also a status issue. More gold you have the more you are looked up to. That gold is probably never sold.
It is handed down generations after generations. I know it firsthand.
In the WEST gold is just a tool to make money, speculation....at least that's the way it is treated.
Some do buy as a form of protection, hedge, insurance etc.....but the large part of is pure speculation.
So that is why all those paper contracts exchanged at Comex is never really settled.(or only settled in cash not actual gold) Transaction happens, someone buys, someone sells, money gets exchanged, one of them win and one of them will lose. That's it. The gold rarely leaves the vault. Of course some entity do take physical delivery Or else why would the Bullion Bankers provide price hedging to the gold producers.
After all I have said & done the BDR price is back to where it ended yesterday.
So funny.
Anyway don't keep your hopes high for the Chinese Yuan/Oil/Gold theory. It will just become a little easier for the Chinese traders to buy & sell Oil/gold contracts by passing the conversion to US dollar.
Will that have an effect in the US dollar exchange rate......very very minuscule.
Yes, if everyone in the world including the New York bankers say we will only trade Oil/gold contracts in Chinese Yuan......that is a different story. Not happening anytime soon.
