The Chinese yuan has been gaining traction and acceptance among global currency markets. As the Chinese economy continues to grow, China will seek to continue to forge its place among leadership in the global financial marketplace. According to a report today by BBC News, the yuan could get reserve status this year…
This is huge. This is another step towards the yuan becoming the global reserve currency of choice.
When the International Monetary Fund this week stated that it does not consider the yuan to be undervalued, many analysts took this as a sign that the Chinese currency could be elevated to reserve status by the IMF.
Such a move would see the yuan join an elite group of currencies including the U.S. dollar, euro, pound and yen.
According to BBC News, the final decision will be made by the IMF in an October meeting.
The IMF’s mission to China said in a statement this week “Appreciation over the past year has brought the exchange rate to a level that is no longer undervalued. China should aim to achieve an effectively floating exchange rate within two to three years.”
According to a recent Bloomberg article, “The exchange rate’s resilience as the U.S. prepares to raise interest rates boosts the attraction of holding yuan, helping increase worldwide usage before the IMF reviews its Special Drawing Rights basket of reserve currencies in late 2015. China is promoting the yuan as an alternative to the dollar, which dominates global trade and finance.”
According to Benny Lam, co-head of research at Agricultural Bank of China International Securities Company, “The IMF remarks signal that the yuan has matured to a stage that it could be held as a reserve currency.”
You are witnessing a further shift away from dollar dominance right before your very eyes…
According to the article, when discussing the inclusion of the yuan to its SDR basket, IMF Deputy Director of Asia and Pacific Markus Rodlauer stated “It is not a matter of if but when.”
We have maintained for some time that the dollar demise is already unfolding. The inclusion of the yuan among an elite group of global currencies in the SDR is simply another step towards the yuan’s eventual reserve currency dominance.
What does this mean for you and your investments?
As the shift away from dollars continues, the dollar will continue to lose value and purchasing power. While the demand for US dollars declines, the supply of dollars will continue to increase (our government makes sure of that). As supply goes up while demand falls, value will decline. It’s the simple supply/demand equation at work.
Investments in dollar denominated assets will therefore lose value as well…
U.S. debt will lose value as demand declines because it is not necessary to hold dollars.
As demand for U.S. bonds and notes declines, holdings in these investments will erode as prices fall and interest rates rise.
Mortgage and credit defaults will increase with the corresponding rise in interest rates.
Real returns on other assets such as stocks and real estate will also decline.
Prices will rise.
Businesses that rely on credit may fail.
The government, in all its wisdom, may decide to print more dollars to fight the economic hardship, thus perpetuating the cycle…
Any way you slice it, as the dollar loses value your dollar denominated assets lose value…
The move away from dollars is already underway. Isn’t it time you took measures to try to insulate yourself and your holdings from dollar depreciation?
Fortunately, hard assets like gold, silver and other precious metals may provide an effective hedge against such currency depreciation.
Precious metals have been considered a reliable store of value for thousands of years, and their inherent value is recognized all over the globe.
Don’t wait until the real dollar slide begins. Consider an allocation in precious metals today…
Fortunately, it has never been easier to incorporate physical gold or silver within your portfolio. Don’t wait until it’s too late.
Getting started with a gold IRA is easy. Our experienced executives are here to guide you, step-by-step, through the entire process. Call us today.Tags: chinese currency, chinese yuan, global reserve status, yuan reserve status