Since its debut as the world’s petrocurrency in 1974, it’s been the concerted intention of China (and others) to discount, destroy, or at the very least replace the Dollar as the premier world currency. The petrodollar arrangement became the cornerstone of U. S. Dollar stability. China’s President, Xi Jinping, took office in March of 2013 and has quickly and successfully built a strong support base, both nationally and internationally. Beginning in June of this year, China cut a deal with Russia to begin buying oil, utilizing the yuan, thus establishing the petroyuan. They sought a similar agreement with other countries, but found them far less interested, due to the yuan’s secrecy and lack of transparency.
So Jinping came up with an ingenious solution. He decided to back the petroyuan with gold! Gold has been the world’s universal currency for millennium and its abandonment by the United States in 1971 created economic turmoil that wasn’t resolved until the back-door Saudi/American arrangement to utilize the Dollar in all petroleum trade transactions was finalized in 1974. Practically overnight, the entire international monetary system had become a fiat currency, under the control of the United States. This was not a welcome scenario in many countries, but those countries were too weak and disorganized to offer resistance. But the resentment and desire to replace has never waned.
In a little over forty years, the world has come full circle and is realizing the value, fairness, and stability of gold, in light of the world’s premier currency. For the first time since 1971, interest in physical gold is being reintroduced on the global monetary stage and the excitement is growing. This obviously represents very negative pressures for the U. S. Dollar and very positive pressures for gold. Once the gold-backed petroyuan gains real traction, all bets are off. The global economy has become more than leery of U.S. stewardship, aggression, and bravado.
All of these developments bode well for gold and other precious metals. A maxed-out, but sputtering stock market offers a potentially, once-in-a-lifetime opportunity to capture profits from an all-time high stock market and convert a larger than usual portion to physical precious metals, such that when a market correction or collapse occurs, investors can benefit in the appreciation of precious metals, from prices currently 1/3 to ½ below previous highs and when/if appropriate, convert back to equities at substantially lower prices. During active economic turmoil in stocks, currency, and other investments, gold’s safe haven attributes can be appreciated more than ever.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.