One More Step In Dethroning The Dollar

China Moves One Step Closer to Dethroning the Dollar

Peter Reagan

De-dollarization seems to be all the rage these days. No longer is it constrained to sanctioned nations cut off from dollar use. Instead, it seems to be a thing of preference. Asia Times reports that China spearheads this trend, despite a lack of confirming official reports.

Of the 400 tons of gold bought by central banks in the third quarter of 2022, the greatest quantity since 1967, only around 100 tons were accounted for: Turkey, Uzbekistan, India and so on. While there has been no official word on the extent of Chinese central bank gold purchases, the report leaves little doubt that China is behind the remaining 300 tons:

One of the worst-kept secrets in global central banking is the extent to which Chinese officials are swapping dollars for gold.

Why, when the dollar is looking high and mighty? Just as Russia saw an opportunity to strike Ukraine, so might China be looking to slip the yuan in inside global trade. We’ve spoken about China wanting few things more than the yuan replacing the dollar as the global reserve currency. 

It’s a long road, and one of the ways to do it would be to make it fully convertible to gold. That move would dispel a lot of the “currency manipulation” reputation the yuan has, from lack of stability to excessive Party meddling in central bank affairs.

If China was indeed to come out with a gold-backed yuan, it would probably be the best way to immediately and strongly rival the dollar. Furthermore, this would be the kind of reaffirmation that gold hasn’t gotten in decades. The first nation who declares their currency is fully-convertible to gold would, I believe, reap massive economic benefits – and leave every other unbacked currency in the world scrambling for relevance.

Just as Nixon’s announcement that ended the gold standard led to a global decoupling of money from tangible value, one major nation returning to any form of a gold standard would, I predict, inspire a wave of follow-the-leader from every other economic power.

Gold would, once again (and as it ever has), be money. The global demand for gold from central banks would, I expect, dwarf this year’s 50-year record buying

A somewhat unrelated news piece tells us that Ghana is planning to buy oil with gold instead of the U.S. dollar. Obviously, oil supply and demand has tied very closely to this whole “Red gold standard” dollar displacement story. While the African nation isn’t allied with either Russia or China in a political sense, it might be worth monitoring stories like this. Are they merely novelties, or will other nations make similar economic moves in the near future?

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