Jim Rickards disputes predictions that China and/or Russia may establish a gold-backed currency in the near future. I’m not suggesting that Rickards is definitely right, but he makes logical and persuasive arguments that may be correct.
For example, other analysts have concluded that China imported over 10,000 tons of gold during the past decade. Based on that 10,000 ton estimate, some analysts believe China has enough gold to back their yuan currency with gold. They’re expecting the imminent appearance of a gold-backed yuan.
Rickards agrees that China has probably imported more than 10,000 tons of gold. However, he also alleges that as only 30% of that gold went into government treasuries while the remaining 70% went into private hands. He concludes that China’s government may have only about 4,000 tons of gold–which is not enough to support a gold-backed yuan. He therefore denies that a gold-based yuan will be issued in the near future.
It may be that the Chinese government received only 30% of the 10,000 tons of gold imported into China–but I’m not convinced. If 70% of those 10,000 tons were held by private individuals, why haven’t any of those private individuals tried to sell their gold to foreign buyers? If 10,000 tons were imported, I’d expect the Chinese government to acquire the lion’s share–say, 90%–enough to issue a gold-backed yuan. Nevertheless, Rickards makes an interesting and persuasive argument to the contrary.