U.S. Stocks, Dollar Decline on China Calls for World Currency

By: GoldCore

The People’s Bank of China report is very significant news for the international monetary system and for the gold market. Their call for a new global reserve currency or super sovereign currency will likely lead to further pressure on the dollar. Despite gold having risen and then fallen in value today, the news is another bullish factor supporting higher gold prices in the medium term.

Especially in the light of the comments from the senior researcher in the ruling Communist Party yesterday. Mr Li Lianzhong, a senior Communist Party official said that “the US is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. He continued saying that” gold should be a better choice”and "if the yuan should go international or become a reserve currency, China needs more gold to back that.”

The comments yesterday and the People’s Bank of China 2008 review released today seem to have been carefully choreographed (as is the Chinese way) and are clear and direct statements of their desired wishes for a reformed multi polar international economic and monetary system with the yuan playing a leading role. The Chinese appear to see gold as a bulwark that will provide stability and aid this transition.

The Chinese government appears to be frustrated with the slow pace of change in international monetary affairs and may be sending a shot across the bows of Western powers.

The fact that equity markets and the dollar came under pressure after the release of the report confirms that China is increasingly powerful on the world economic stage.

Bullion Services Team

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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