Gold To Soar As China Moves To A Gold-Backed Currency

China gold backed currency

Lately, the US dollar has swooned, bitcoin has soared and gold has reversed as a consequence of global quantitative easing. If central bankers can seemingly print money with impunity, the value of money eventually erodes. After all, the only thing underpinning this fiat currency is the faith and credit of the US government and that faith is testing its limits. Under the classic gold standard, countries accumulated gold in order to conduct their business and backed their respective currencies with gold. Exchange rates were fixed against gold just as they are fixed against the dollar today. Then countries could not print their way nor pay their bills with paper obligations to conduct business. The strongest currencies reflected the strongest economies.

Today, the main argument against reverting to a gold standard is because there’s not enough gold in their world, which overlooks the fact that most central banks already hold gold in their reserves. The European Central Bank (ECB) for example was set up with contributions of gold from its member countries. Ironically. America today is the largest holder at 8,100 tonnes but is also the world’s largest debtor. Canada unfortunately sold its gold and their cupboard is bare.

Nonetheless, in the past few years, some nineteen central banks continue to be net buyers of gold. Russia has made monthly purchases. China regularly accumulates gold, and officially holds over 2,000 tonnes making it the fifth largest holder in the world, up from only 600 tonnes a few years ago. We believe China’s purchases are a hedge against their huge $3 trillion dollar of reserves and is a step towards the realignment of the global monetary order.

[ Source: King World News ]

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