Chinese Gold Standard Would Need a Rate 50 Times
Bullion’s Price
By Nicholas LarkinEddie Van Der Walt - 1:16 PM CEST May 20,
2015
A move to a gold standard in China would require an exchange rate of as
much as $64,000 an ounce, 50 times bullion’s price now, according to Bloomberg
Intelligence.
A traditional gold standard, in which the precious
metal backs the currency, is basically impossible at current prices due to the
amount of metal needed and there’s no evidence the sixth-biggest bullion holder
will adopt one, Bloomberg Intelligence said in reports published Wednesday. Any
attempt probably would involve new technologies and depend on the ratio of what
is backed, it said.
Chinese policy makers are trying to establish the yuan
as a reserve currency, and backing it with gold would help attract foreign
capital inflows, the Bloomberg research unit wrote. Theoretically, to create an
exchange rate of one ounce of gold for every $64,000, the country would need
about 10,000 metric tons of the metal, they estimated. That’s nine times the
nation’s official holdings and about 6 percent of all the bullion ever mined
globally.
“It would probably have to be very different than an
old gold standard,” Kenneth Hoffman, the Princeton-based head of global metals
and mining research at Bloomberg Intelligence, said in an interview in London
on Tuesday. “They have all this currency out there, they want it all soaked up
by central banks...”
