The U.S. dollar is on the cusp of seeing its longstanding ‘world’s reserve currency’ status disappear as central banks in emerging nations increase their gold holdings. Many emerging economies are manoeuvring gold into position as a key settlement mechanism central to a new international monetary regime, says investment firm Goehring & Rozencwajg.
The firm’s CEO says, “The U.S. dollar might be on the verge of losing its reserve currency status,” Goehring & Rozencwajg managing partner Leigh Goehring told Kitco News. “A change in the dollar’s reserve currency status would be the most impactful market shock of the last forty years.”
Goehring & Rozencwajg says that more and more transactions between nations are now taking place in the official currency of China, renminbi. Saudia Arabia, Russia, Brazil and France are just a few of the high-profile nations known to be conducting or planning to conduct international transactions in renminbi. However, China’s closed capital account means it can’t be exchanged, which means gold is the natural solution. Leigh Goehring explains, “Any move by China to displace the U.S. dollar as a reserve currency must include some degree of gold convertibility. Foreign holders could then convert some portion of their trade surplus from renminbi into gold via the Shanghai gold exchange.”
He says this could be part of a broader move towards the yellow metal and away from the greenback. This is just one more example of gold being stronger than ever. Buy now.
