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Petro-Yuan Challenges The Dollar: Good For Gold

Apr. 09, 2018 2:39 PM ETGLD, GOLD, GOLDX, ABX:CA16 Comments


  • China is continuing its long-running assault on the US dollar as the world’s global reserve currency.
  • The PetroDollar is backed by US Treasuries, which helps fuel US government deficit spending. Take that support away and the US dollar is in serious trouble. It looks like that.
  • Gold closing this coming week above $1337 is going to activate the price momentum into a bullish camp that is indicating targets at $1352 and $1367.

China is continuing its long-running assault on the US dollar as the world’s global reserve currency. The focus recently has been the world’s oil markets. China is the largest crude oil consumer, which gives it great influence over the oil markets. That influence was highlighted on March 26, 2018, when China launched trading of the Petro-Yuan to challenge the US Dollar and the PetroDollar. The South China Morning Post reported that the PetroYuan started trading on the Shanghai International Energy Exchange at 440.20 Yuan or $69.67 per barrel. PetroYuan futures traded more than 10 billion notional trades in the first hour, with than 23,000 contracts in the first hour, which signaled significant demand.

Graticule Asset Management Asia’s Adam Levinson, managing partner, said the shift to the PetroYuan will be “a wakeup call” to those investors who have not been paying attention. It could deal a major blow to the already weakening US dollar.

The Yuan is already among the world’s five most used currencies and the Chinese have been actively promoting the Yuan globally to replace the dollar. In 2015, in the first of a number of strikes against the dollar, Gazprom Neft, Russia's third largest oil producer, started using the renminbi for trade settlement instead of the dollar. Iran soon followed suit by dropping the dollar for trade settlement. Iran started using the Yuan and other foreign currencies for trade. China in 2015 also began to develop their new Silk Road, which could boost trade with Europe, further supplanting the dollar as the world’s reserve currency, while increasing use of the Yuan and Euro.

China in 2015, however, still faced obstacles to making the Yuan the global reserve currency. In 2015, Nick Cunningham of Oilprice.com wrote,:

Despite accounting for much of the world’s growth and demand in the 21st

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