China has been hoarding domestic gold production in a major way, while simultaneously working to increase the convertibility and appeal of the yuan. This likely means an effort to back the yuan with gold is underway. The result of this change could spell out the death of the U.S. dollar.
Although there continues to be a decided lack of mainstream media coverage for this issue, China is hoarding domestic gold production at an unprecedented rate. There are a number of possible motives for this activity, however, none of them forecast a healthy future for the U.S. dollar or the American economy overall. While China has long been forced to use the U.S. dollar in international trading, this could be a reality that is soon to change.
China Is Moving Itself Into A Power Position
Many economic analysts assume that much of China’s recent financial activity has been motivated by a desire to gain a seat at the world table. More likely, however, these recent efforts to hoard domestic gold production are aimed at placing China at the head of the proverbial table. China has certainly gained clout in other areas, especially in terms of its financial superiority over America. Nearly a trillion dollars of U.S. debt is currently owned by China and this is the only nation apart from the U.S. that is currently using the dollar in international trade. Thus, the U.S. has exhibited a clear financial reliance upon this nation and continues to do so.
Rapidly Shifting The Status Of The Yuan
The most tactical and likely reason for the massive hoarding of domestic gold production is to obtain sufficient quantities for backing the Yuan with gold. Following such an announcement, a massive financial and power shift would definitely occur. In fact, some analysts believe that such an event could could spell out the death of the U.S. dollar. Once the Yuan was effectively backed by gold, there would no longer be any need for China to use the U.S. dollar in foreign trade. This nation could simply use the yuan instead.
Evidence Of This Shift
It is much more than mere speculation to say that China is hoarding domestic gold production in order to increase the strength of the yuan. There has been a massive undertaking to market this currency and to increase its convertibility. Whereas once the yuan could only be converted into yen and U.S. dollars, China has recently struck agreements concerning currency convertibility with both New Zealand and Australia. This ultimately means that the yuan can now be used to trade directly with Australia and New Zealand, even though it was necessary for China to first convert the yuan into U.S. dollars in the past. The end result of these changes is that the United States has been effectively removed from these deals.
Why Power Is So Important
Ultimately, not only will backing the yuan with gold give China much more clout on the international scene, but it will also give China a greater voice in global politics. This is what has likely caused China to import more gold than any other nation, in spite of its status as the world’s top gold producer. With an estimated 7,000 tons of stockpiled gold, making the yuan a desirable trading currency for other countries is no longer just a pipe dream. While importing massive amounts of gold from other countries, China is simultaneously working to increase the marketability and appeal of its own currency. Thus, although some might see this as a concerted effort to become a major player on the world stage, it is beginning to look far more like an attempt to become the top player and the one with the most political and financial clout
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