The collapse of Petrodollar: the gold standard returns to world markets & nbsp; – genxfxtrader
China, the second largest economy in the world today has been increasing its gold reserves at the PBOC, is preparing to launch in Shanghai the first oil contracts traded in a currency other than the dollar. We would be at the birth of Petroyuan.
Most of the paper gold is gold, far from the gold material actually exists as underlying contracts.
Recently in recent years we have seen how China threatened to international economic organizations to launch its own gold trading yuan.
Say the word “threat” because really what China did was announce this kind of when action an international organization like the IMF refused to accept the yuan as currency deposit multicurrency system DEG, monetary unit consisting of four major currencies in the world, namely the dollar, euro, pound, Swiss franc and the yen.
Time and again these measures were suspended that China always had what he wanted or perhaps his due as the second largest economy in the world. For example, in September 2016 , the IMF finally accepted the Chinese currency as deposit the SDR system. China then suspended the announcement of issuing gold Yuan from Shanghai. A month later announced the sale of bonds with a maturity of 5 years made up the SDR. Thus attracting the interest of investment funds and central banks.
Maintain reserves in a multicurrency, such as DEG, eliminate the risks of fluctuations of different currencies worldwide at a time when we could say that the currency war is not over and may be further complicated by a possible trade war. For example the weakening of the dollar or the strengthening of the pound would not affect those who keep their reserves in a currency composed of both.
Resolved this battle in which China seems to have won on the horizon is about far deeper another. We talk about changing the current monetary system and the disappearance of the petrodollar.
At the end of World War II the world ‘s largest industry is the American industry intact . Therefore the first economy in the world and that the rest will depend on the economy of the United States. It is logical that the Bretton Woods agreement establish that the base currency of the world was the dollar. Other developed countries could send their gold reserves to the US Federal Reserve in exchange for dollars they would have a fixed amount for their gold, guaranteeing the purchasing power of paper would receive conversion. Specifically for each $ 33 per ounce of gold.
However, this system began to become unstable arrived the 70. The rest of the world economies recovered. European industry began to compete with the US, and trade deficits came to the United States thus affecting productivity and employment rate. To maintain domestic stability the United States resorted to a false competitive advantage. Lowering the value of the dollar against other currencies would make their products were cheaper in international markets without being thus more competitive. In other words, they did not produce at lower cost and faster just cheapened the currency in selling their products. The only problem is that its currency is pegged to a fixed conversion with gold.
In 1972 Nixon gave the solution announcing suspension conversion fixed dollar-gold. European partners were outraged, especially France that claim with a military frigate gold repatriation. Nixon said he unfortunately could not make repatriation and accept this as a temporary situation.
Today, in 2018, 47 years later, it has printed trillions of new dollars since then and the value of gold bullion is around $ 1400. In terms of money and gold it would be as if we were living in a period of hyperinflation that lasted decades. Much of financial bubbles and instability of the current monetary system resulting from that decision.
However the problem may be even deeper than it seems here. If we consider that the highest point of trading gold in the world is in London and more than 90% of those negotiations are carried out on products of gold, as ETF and futures settlement difference it is that the nominal figures negotiated exceed more than 200 times the annual production of gold mining according to figures from COMEX. In other words, most of the gold is paper gold, far from the gold material actually exists as underlying contracts, estimated in terms of 2017 about 130 thousand tons against 300 thousand negotiated in these agreements.
I have described the background and the context in which the petrodollar die and be born the Petroyuan a new gold under his arm, provided they are not negotiating with China a different solution that allows survive the petrodollar.
On March 26, China was preparing to launch a new oil contract since the Shanghai stock market quoted in yuan. This contract will make him well for gold, the type of contract we see is a future delivery of the underlying at maturity of the contract. This means that gold will deliver if you claim it as possessor of such contracts.
Some analysts believe that this would be impossible because China does not allow free trading of gold, does not allow export gold. But the Shanghai stock market is a free trade zone if possibly accept such transactions. Add to this that China was in 2017 the largest oil importer in the world. More than 200 billion dollars. Think now, if such purchases made in yuans, signifi would you rate the demand for dollars would have fallen 200 billion.
Would you prefer Iran to sell crude directly to Europe in exchange for euros at a time when the European monetary policy are looking for a cheap euro?
The United States knowing that your dollar will not be attractive to not be convertible with direct gold made a masterstroke negotiating with OPEC oil exclusively in dollars quoted. So any country that requires fuel in the world would have to buy dollars to buy oil. The key point in this process was trading Kissinger made with the Saudis.
Well, China has met with the Saudis and has announced that it will participate in the largest public offering of a company that has ever been done, Saudi Aramco Petroleum. The Saudis are well away from his father former partner of the dollar and approach their new partner ‘s father Yuan, may this be the beginning of new era in the international monetary system, the birth of Petroyuan.
The truth is that it makes sense, for example, would you prefer Iran to sell crude to Europe directly in exchange for euros at a time when the European monetary policy are looking for a cheap euro or prefer to sell through the Shanghai Stock Exchange in yuans and backed by physical gold? The answer is obvious I think considering that physical gold is the most valuable monetary asset.
We end this article giving a few strokes the geopolitical stage. The Syrian conflict has been resolved with the clear defeat of the US – backed groups in the Middle East and a deterioration of its relations with the partners present. To countries like Turkey, a NATO member has distanced US voicing their dissatisfaction with this country for its support of Kurdish rebel groups.
We have all the ingredients in a shaker for real change as never been seen in decades in world markets. The earthquake may cause this change will be dangerous but also bring many investment opportunities.
This article has been extracted from the April issue of the magazine TRADERS ‘by genxfxtrader, if you are interested in reading more articles related Trading, you can subscribe for free below.
Interesting article. A mere contributions:
– Iran has recently stated that it will use the EUR instead of USD in international transactions. That is not incompatible with that will use Yuan and other currencies, but clearly preferred to use the EUR as a reference from now.
– China does not have enough gold to back the Yuan … and less when we do not know the many “pufos” financial that exist there. Then in the “printer” NO lag far behind the US, ECB, BOJ …
– is not feasible a return to the “gold standard”, although many countries are asking what the “small mouth” as it is the recent case of Turkey.
– YES that will produce an erosion in the USD as you get older the “dwarfs” …
Incidentally, the PetroYuan is not “backed” by gold … That was a ” trial balloon” that was launched interested at the time from a Japanese environment.