Tuesday, April 28, 2015

What Will Happen to Gold When the Chinese Yuan Joins the SDR Basket

There has been much speculation recently regarding the likelihood of China announcing a much bigger gold reserve for possible inclusion of the RMB (renminbi – or yuan) into a reset IMF Special Drawing Right as a preliminary move towards recognition of the yuan as a global reserve currency.

What will this mean to its pegging to the US Dollar? Will it continue to peg itself to the Dollar?

When the Chinese yuan is included into the SDR basket, what will this mean for gold and the Chinese currency? Bearing in mind that the Chinese has been aggressively accumulating gold in the past few years. This is an event to be watched.

The IMF will be holding a meeting in May which will start to discuss formally any revisions to the composition of the SDR. A second meeting will be held in October which will confirm any new changes and the revised SDR basket will come into operation on January 1st 2016.

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