Delay ahead in Chinese yuan acceptance into SDR

This morning the LBMA gold price was set at $1,086.50 down from $1,092.60 down $6.10. The euro equivalent was unchanged from yesterday. Ahead of New York’s opening, gold was trading in London above $1,091.50 and in the euro at €1,001.15.

The silver price closed at $14.59 up 7 cents in New York. Ahead of New York’s opening it was trading at $14.62.

There were sales of 2.087 tonnes from the SPDR gold ETF and 0.34 tonnes from the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 672.703 tonnes and 162.58 tonnes in the Gold Trust. This had a barely discernible impact as the gold price slipped slightly because of the strengthening dollar. As you can see the euro price was the same as yesterday’s price setting. But it is possible that the sales were immediately absorbed in Shanghai.

We noted that ahead of New York’s opening the gold price changed its daily pattern of slipping against the dollar and climbed quickly to over $1.093. In the euro it recovered over €1,000. With so many speculative short positions there is a distinct likelihood of a short covering rally. Let’s see.

Today’s news out of China is that the Chinese Yuan may see an announcement confirming it will be included as one of the SDR currencies, by the IMF, in November, but the implementation of this will be delayed for 9 months until September 2016.

Latest data informs us that the Chinese Yuan is now being used in 25% of China’s foreign trade and this percentage is accelerating. In 17 countries there are Yuan swap arrangements in place allowing this percentage to continue to grow.  2.8 trillion Yuan are used in foreign trade. The Yuan is 3rd in the world behind the dollar and the euro in trade finance.

But the intervention in the Chinese equity market and a certain degree of lack of transparency appears to be behind the reasons for the delay. Convertibility of the Yuan and a removal of capital controls would be needed to allow the Yuan to qualify as a reserve currency. Once it hits this category [now Sept 2016] we will have entered a multi-currency monetary system with dollar hegemony evaporating. This is positive for gold.

Julian D.W. Phillips for the Gold & Silver Forecasters and

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