the snowball is growing

Last week's announcement that the ASX will provide a Yuan settlement service is another [small] nail in the coffin of the $US reserve status.

At the moment only the $US, the Yen and the $Aust enjoy full convertibility with the Yuan. Last October China and the Eurozone established a mechanism for currency swaps for the Yuan and the Euro.

Full convertibility between the Euro and the Yuan surely can not be far off.

In terms of international trade, already it will be possible for Australian and Japanese companies to by-pass the $US and conduct business denominated in Yuan [in their trading with each other] if those companies are holding Yuan due to their trading with China.

How much more so will companies use the Yuan they might hold to conclude business deals once the Euro is fully convertible with the Yuan?

Little by little the $US is being pushed off centre stage.

Possibly the most important characteristic a 'reserve currency' must display is stability and low volatility. Can the $US demonstrate those attributes going forward, in the context of ongoing, albeit tapered, QE? A big ask I think.

In all of this, there is every reason for the Chinese Government to continue accumulating gold. Trade out of US treasuries and into gold. I also believe it is a reasonable thing to connect gold to the Yuan, the more gold the Chinese Government has the more stable and predictable the value of the Yuan.... and the more attractive as an alternative to the $US for international settlements.