Gold Supports Yuan Internationalization

Ye Tan discusses the long-term uptrend in the U.S. dollar and why it will keep gold prices low, but she goes on to say gold is the basis for an international, fully convertible yuan.

增持黄金有利人民币国际化

China should increase its gold reserves

Compared to many other countries, China's gold reserves account for a low proportion. Gold and Silver Investment Company Managing Director Mark O'Brien noted that the proportion of its total gold reserves held by China, far below the global average of about 10%.

According to the World Gold Council (WGC) 2014 年 announced in July, China currently only 1054.1 tons of gold reserves, the proportion of foreign exchange reserves accounted for only 1.6%. Germany was 71.7%, up 74.7% United States, even in emerging countries such as Russia and India are also more than 5%. The fourth quarter of 2014 was 2.4%, Mexico, Australia, 5.7%, India 6.7%, Russia 12.1%.

Gold accounted for low impact on the stability of China's foreign exchange reserves. WGC (World Gold Council) said in a report that China should increase the proportion of gold in total reserves to about 5%, in order to help disperse the foreign exchange risk, while holdings of gold reserves in the internationalization of the RMB will provide weight help future competition for gold pricing.

An increase of RMB favorable credit

Experts pointed out that the internationalization of RMB is a natural market process, the implementation of China on the occasion of the internationalization of RMB, holdings of gold reserves could boost investor confidence, an increase of RMB credit risk control. Golden expert Tan Weihuan believe that the renminbi to be internationalized, increase gold reserves are very important condition, because it can increase the confidence in the world's renminbi, to expand the flow capacity of the yuan.

World Gold Council, said Albert Cheng, managing director of the Far East, China's finance to develop and promote the internationalization of RMB have specific measures fall, gold will play a very important role of pioneer. "If China really have 30,000 tons of gold reserves, so the size of the gold will be to some extent become the strong backing of RMB." Simon Hunt, CEO of Strategic Services cock - Hunt, said.

March 19, the central bank introduced new regulations on the import and export of gold and the number of products were restricted approval, and implementation of a permit system, implemented since April 1, 2015. From April 1, with assets of overseas domestic mining companies will also be allowed to import gold directly. Ye Tan believes that further liberalization of the domestic gold import and export restrictions will help expand the gold market, the domestic price of gold will fall, encourage to buy gold, the underpinning for the internationalization of RMB.

She discusses the issue on her blog as well: 增持黄金加快人民币国际化. She sees gold potentially falling to $600 an ounce in the midst of a U.S. dollar bull market, but no lower because the U.S. will launch another quantitative easing program.