How China's Petro-Yuan Is Having an Influence on the United States

How China’s Petro-Yuan Is Having an Influence on the United States

May 21, 2018

China’s Petro-Yuan has been challenging the American dollar for some time as the standard for the world’s global reserve currency, and that challenge has become especially intense as of late. Now, people interested in gold investing in Scottsdale, AZ are paying close attention to the progress of the Petro-Yuan and the ongoing trade war between the United States and China.

The biggest focus for investors in recent months has been oil markets around the world. China is the largest consumer of crude oil on the planet, which means it has a tremendous amount of influence over the crude oil markets.

As a recent example of this influence, China launched trading of the Petro-Yuan on March 26, a direct challenge to the American dollar and the PetroDollar. Reports indicated the Petro-Yuan began trading on the Shanghai International Energy Exchange at 440.20 Yuan, which is equal to $69.67 per barrel. Futures for Petro-Yuan traded more than 10 billion notional trades in the first hour alone, resulting in 23,000 first-hour contracts—that showed a tremendous amount of demand and was a revelation for investors who had not already been familiar with the potential power and influence of the Petro-Yuan. As the Petro-Yuan grows in strength, it could wind up weakening the U.S. dollar even more than it already has.

Widespread usage

Already, the Yuan is one of the five most used currencies in the world. China has been pushing global use of the Yuan, even going so far as to attempt to replace the dollar as the world’s primary source of global currency.

The dollar has certainly had some high-profile struggles in recent years. In 2015, for example, Gazprom Neft of Russia, the nation’s third-largest oil producer, began using renminbi for trade settlements instead of the U.S. dollar, and Iran followed suit shortly thereafter, opting for the Yuan and other types of foreign currencies.

In 2015, China began developing its new Silk Road with the purpose of bolstering trade with European nations while also attempting to push the dollar out of the picture as the world’s reserve currency in favor of increasing usage of the Euro and the Yuan.

What happens to gold?

Experts believe that as the PetroDollar falls, the value of gold could very well rise. The United States has not used the gold standard since the early 1970s, but physical gold is working its way back into the monetary system on a global level more than it has in years. In fact, China will make the Petro-Yuan convertible into gold, which is outstanding news for gold owners, as investors and oil traders will want their investments backed by gold rather than government promises.

Therefore, gold owners and investors would do well to watch the progress of the Petro-Yuan, as its future could very well be linked to what happens with gold investments moving forward.

For more information about gold investing in Scottsdale, AZ, we encourage you to contact our team at Gold Wealth Financial today. We look forward to working with you!

- by Steve Hunt

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