Gold Price Should Benefit From China's Call For a New Reserve Currency

Gold Price Should Benefit From China's Call For a New Reserve Currency

Gold price continues to trade around 920 with a soft tone in European morning. Investors have shifted the focus from the Fed's inflationary asset buying program announced last week to the Treasury's PPIP.

The G20 will be meeting next week. Earlier this week, the Chinese Government called for creating a new currency in replacement of the USD as a reserve currency. We believe the topic will be one of the main focuses in the summit and if the proposal gains support, gold will be an immediate beneficiary.


The Chinese central bank (PBOC) urged the IMF to be responsible for creating a 'super-sovereign reserve currency', a new currency which is free from inherent risks of credit-based currency and facilitates global liquidity. China, which possesses the world's largest reserve in USD ($740B), once again showed explicit concerns on USD.

A central bank advisor said today that China has suffered badly from the dollar's role as a global standard. 2 weeks ago, Premier Wen Jiabao asked the US to 'guarantee the safety of China's asset.