Gold Backed Renminbi Prediction…And Gold Price Forecast For Year 2020

May 20, 2015

An article published last week in the world renowned Russian Pravda.ru site galvanized our interest. Its title is:  “China saves up 30,000 tons of gold to topple US dollar from global reign” – See entire article.  This article says unconfirmed reports allege that  China already has about 30,000 tons of the precious metal.  UNTRUE...as we will prove later in this analysis.

In recent months we have written extensively on China’s covert objective to create a Gold-Backed Renminbi/Yuan.  China’s objective is to have the Renminbi replace the US Dollar as the world’s Number-1 Foreign Reserve currency.  To date our views on this subject have attracted growing interest worldwide. 

Below are linked a number the articles regarding China’s insatiable gold accumulation, which will be soon forwarded to prominent sites worldwide. Indubitably, the gold price will soar hyperbolically as investors horizon to horizon jump on the gold bandwagon.  Moreover, Central Banks will continue to stampede into the shiny yellow as the gold price begins to soar…at the expense and detriment to the value of the US greenback.

********

China’s Gross Shortage of Gold Reserves

A Gold Backed Renminbi (Yuan) Looms On The Horizon

Internationalization Renminbi Requires Increase In Gold Reserves

Gold Price Forecast In Yuan/Renminbi

China’s love, lure and hunger for gold is becoming increasingly voracious for several reasons. The next six years are expected to see China’s middle-class grow by over 60%, or 200 million people, to a total of 500 million," write the analysts at the World Gold Council. "Comparing this to the total population of the US, which stands at 319 million, puts the size of this new market of affluent consumers, with the propensity to buy gold, in perspective. In addition to these newly emerging middle-classes, rising real incomes, a deepening pool of private savings and rapid urbanization across China suggest that the outlook for gold jewellery and investment demand in the next four years will remain strong."

INDUBITABLY, China is accumulating gold from where ever it can get it.
During the past nine years China’s yearly gold imports have enjoyed a CAGR of 25% (Compound Annual Growth Rate). However, it is important to notice the rate of increased gold imports from Hong Kong has accelerated since 2010…and will most likely continue to go viral in years ahead as income growth inexorably rises.

More On Gold Price Forecast In Renminbi:

Gold Price Forecast In Yuan/Renminbi

Soon The Chinese Renminbi Will Replace US$ As Global Reserve Currency

China is clearly trying to position the yuan/renminbi as the alternative global reserve currency. The Chinese surely realize that they will need to surpass the US Federal Reserve’s official, but
unaudited, gold holding of 8,133.5 tonnes.

According to official sources, China has today approximately only 1,050 tonnes of gold. This means China must buy 7,000 tonnes of gold to be at par with the USA. Needless to say this is a daunting task, because the total yearly global mine production of gold is only about 2,600 tonnes. Literally, China needs to buy nearly THREE years of worldwide gold mine production.  Logically, this is a near impossible task…without catapulting the gold price to astronomical heights.

Indubitably, China's stated objective to have its Renminbi currency Gold-Backed will send the gold price into orbit around the sun.

Since 2001 the Yuan price of gold has soared almost 300 percent. No other comparable investment return in China exists today.  This is WHY 1,300,000,000 China citizens are stampeding to buy gold every day…with the full consent and encouragement of Beijing.  Below is the Chinese Renminbi price of gold from 2001 to the present.

Below is Renminbi (yuan) price of silver since 2001

Moreover, China has plenty of money to accumulate gold: CHINA’s Money Supply M2 has been exploding since 2001 with a CAGR of 19.4% (per year!!)

Indeed, a gold backed Renminbi is most probably a covert objective of The Peoples Bank of China

Recent years exploding demand is only the demand from Chinese investors and savers. It does not include purchases by the less than transparent People’s Bank of China, which is almost certainly continuing to diversify their massive $3.3 trillion currency reserves into gold bullion in order to protect themselves from their massive US dollar ($1.1 trillion dollars of US debt alone, according to the Treasury Department) and other currency exposure -- i.e. FOREX Risk Exposure.

Chinese Renminbi Gold Standard

China is clearly (albeit covertly) trying to position the Renminbi/Yuan as the alternative global reserve currency. The Chinese likely realize that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tonnes (equivalent to 75% of Total Foreign Reserves). China is the sixth largest holder of gold reserves in the world today and officially has reserves of 1054.1 tonnes (equivalent to only 1% of Total Foreign Reserves), which is less than half those of even Euro debtor nations France and Italy who are believed to have 2,435.4 and 2,451.8 tonnes respectively.

China’s ambitions to rival and even replace the dollar were seen with news that China is to allow all exporters and importers to settle their cross-border trades in the yuan this year. The People’s Bank of China said that it was “part of plans to grow the currency's international role” and “would respond to overseas demand for the yuan to be used as a reserve currency.”

MEANWHILE, Russia is also attempting to position the Russian ruble as a global reserve currency.

It seems extremely likely and logical that senior and influential Chinese policy makers are seriously contemplating the ramifications of a gold backed Renminbi. And in our view this would cause the gold price go viral in all currencies.

Gold Forecast In Renminbi/Yuan

China’s love and hunger for gold is becoming increasingly voracious for several reasons. The next six years are expected to see China’s middle-class grow by over 60%, or 200 million people, to a total of 500 million," write the analysts at the World Gold Council. "Comparing this to the total population of the US, which stands at 319 million, puts the size of this new market of affluent consumers, with the propensity to buy gold, in perspective. In addition to these newly emerging middle classes, rising real incomes, a deepening pool of private savings and rapid urbanisation across China suggest that the outlook for gold jewellery and investment demand in the next four years will remain strong."

China is accumulating gold from where ever it can get it.

During the past nine years China’s yearly gold imports has enjoyed a CAGR of 25%. However, notice the rate of increased gold imports from Hong Kong has accelerated since 2010…and will most likely continue to go viral in years ahead as income growth inexorably increases.

More on Gold Forecast In Renminbi: Rising Gold Prices Will Be Fueled By China Dumping U.S. Treasuries:   Rising Gold Prices Will Be Fueled By China Dumping U.S. Treasuries

Relative Performance Of Gold…And The China Factor

http://www.gold-eagle.com/article/relative-performance-gold%E2%80%A6and-china-factor  

Gold Prediction and Forecast Summary

It is highly probable China is accumulating gold hand over fist with a view to create a Gold-Backed Renminbi. The specific objective of Beijing is to establish the Renminbi as the Primary International Reserve Currency…thus replacing the US dollar.

Nonetheless, there is NO WAY China has today anywhere near 30,000 tonnes of gold…for the following reasons. The entire world’s gold mine production is a mere 2,600 tonnes per year. Moreover, China’s own annual gold production is less than 500 tonnes.  Consequently, the Sino nation could NOT have accumulated that much gold without the having sky-rocked the price of gold into the stratosphere. But rest very assured China is slowly and methodically accumulating gold – and will continue to do so for years to come.

It is eminently logical that in the event China achieves the above daunting monetary goal (sometime in the near future), it will necessarily fuel the gold price into orbit.  This leads us to forecast a gold price of US$12,600/oz by 2020. Moreover, the Renminbi gold price is similarly forecast to reach 15,100 Yuan by the year 2020.

******** 

Related Research:

Gold Price Forecast Of Plausible $12,600 By Year 2020

China Gold Dragons

Gold Price Forecasts And Gold Predictions For This Secular Bull Market

How Much Gold Can China Buy  

Dragon Rising: China's Gold Will Break World's Dependence on US Dollar

The TRUTH about China’s Massive Gold Hoard

Will China Finally Announce its Gold Holdings to the World?

When Will China Disclose Its True Official Gold Reserves And How Much Is It?

********

Gold-Eagle provides regular commentary and analysis of gold, precious metals and the economy. Be the first to be informed by signing up for our free email newsletter.
 

Free Gold-Eagle Newsletter!

  • Fresh weekly insights on gold, precious metals, and the economy
  • Leading authors from around the world
  • Always free
  • Stay informed!
 

 

Founder of Gold-Eagle in January 1997.  Vronsky has over 42 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a financial analyst with White Weld. Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese.  His education includes a degree in Petroleum Engineering from the University of Oklahoma, a Liberal Arts degree from Hartnell College and a MBA in International Business Administration from UCLA – qualifying as Phi Beta Kappa and Tau Beta Pi for high scholastic achievements.  Vronsky believes gold and silver will soon be recognized as legal tender in all 50 US states…and many countries worldwide.  You may reach I. M Vronsky at: vronsky@gold-eagle.com and/or vronsky@bellsouth.net

78 percent of the yearly gold supply is made into jewelry.

Gold Eagle twitter                Like Gold Eagle on Facebook