Thursday, May 24, 2018

After the success of the Yuan denominated oil contract, China is ready to make the Yuan the go to currency for gold

In just two months since China initiated a competitor to the London and Chicago oil markets with the implementation of their Yuan denominated oil contract, the Chinese have experienced a fantastic track record of success as their contract now controls 12% of this global market .

Yet oil is not the only commodity China seeks to dominate, and in fact was not their first in taking on the West.  Back in late 2015, China expanded the Shanghai Gold Exchange to compete with the LBMA and Comex on gold pricing, and in just the past 2.5 years they have become the world's largest physical gold market.

So as the primary caretaker to the world in that market, it appears that China is ready to take their success from the yuan denominated oil contract and do the same for gold as on May 24, the London Metals Exchange (LME) announced that they will soon be instituting a yuan denominated gold futures contract which will compete directly with the dollar denominated ones out of both London and New York.

A metals futures contract denominated in Chinese currency may soon be launched at the London Metal Exchange (LME), according to the exchange chief executive, Matthew Chamberlain. 
“At present, investors are trading our products in US dollars. We would definitely like to explore the possibility of launching products denominated in offshore renminbi,” Chamberlain said in an interview with the South China Morning Post. 
The LME, which is owned by Hong Kong Exchanges and Clearing (HKEX), currently allows traders to use the Chinese currency as collateral. Last July, the HKEX stock market also launched yuan-denominated gold futures. 
LME’s chief executive didn’t specify when the new metals contracts would start changing hands in London. However, Chamberlain is reportedly confident that yuan-backed futures contracts are destined for success, as the Chinese currency is becoming more and more used in global finance. – Russia Today
China's rapid success in the oil markets has come in large part from the United States implementing new policies of economic sanctions which have driven countries like Iran to sell their oil to China rather than to London or Chicago.  And as more and more nations seek to divest themselves from dollar hegemony, switching over to both gold and the yuan is now a viable alternative as it protects them from said sanctions, and it also acts as a counter weapon against dollar dominance.

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