China Plans Yuan-Priced Crude Oil Futures Convertible To Gold

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The global de-dollarization trend continues with China launching a crude oil futures contract priced in yuan and convertible into gold.

 

DENPASAR, Indonesia — China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.

The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.

China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

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Yuan oil futures are expected to attract interest from investors and funds, while state-backed oil majors, such as PetroChina and China Petroleum & Chemical (Sinopec) will provide liquidity to ensure trade. Locally registered entities of JPMorgan, a U.S. bank, and UBS, a Swiss bank, are among the first to have gained approval to trade the contract. But it is understood that the market will be also open to retail investors.

Concerns about the US Dollar remain as the purchasing power of the US Dollar has fallen 60% since July 1983.

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Here is the longer term deterioration of US Dollar purchasing power since the creation of The Federal Reserve. As in a 96% loss in purchasing power.

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A Christmas present to the banking industry? Absolutely!

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