De-Dollarization Accelerates: China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

Tyler Durden's picture

Authored by Tsvetana Paraskova via OilPrice.com,

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review.

To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.

Last month, the Shanghai Futures Exchange and its subsidiary Shanghai International Energy Exchange, INE, successfully completed four tests in production environment for the crude oil futures, and the exchange continues with preparatory works for the listing of crude oil futures, aiming for the launch by the end of this year.

“The rules of the global oil game may begin to change enormously,” Luke Gromen, founder of U.S.-based macroeconomic research company FFTT, told Nikkei Asia Review.

The yuan-denominated futures contract has been in the works for years, and after several delays, it looks like it may be launched this year.

Some potential foreign traders have been worried that the contract would be priced in yuan.

But according to analysts who spoke to Nikkei Asian Review, backing the yuan-priced futures with gold would be appealing to oil exporters, especially to those that would rather avoid U.S. dollars in trade.  

“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Alasdair Macleod, head of research at Goldmoney, told Nikkei.

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Bay of Pigs's picture

Game changer if true.

Creepy_Azz_Crackaah's picture

They're not backing it with Bitcoin?

So many on ZH keep insisting that Bitcoin is **the** future and is WAY better than gold.  China obviously doesn't read the ZH comments.

aloha_snakbar's picture

That is a pretty small faction that still live in basements and wear Teenage Mutant Ninja Turtle pajamas...

auricle's picture

Looks like China has the gold...

RAT005's picture

Oil futures priced in other than $ US and a currency convertible to gold. That's a huge double wammy to $US fiat.

ET's picture

And the Precious Metals Race is on.

Physical demand is rising and Gold and Silver inventory is declining.

https://sdbullion.com/gold/american-gold-eagle/1-oz-gold-eagle-coins

The fastest to unload crypto at nosebleed prices and grab Physical Gold and Silver will be the winner. The Endgame for crypto has always been Hard Assets. Those who dispute this are liars.

The Cooler King's picture

Won't exactly be as easy as killing Saddam Hussein or Ghaddafi I imagine.

ET's picture

China has won the long game masterfully.

Patience and hard work are rewarded in the end.

Americans should look inward and see what went wrong. Blaming the winner for winning and attacking the winner like a sore loser is what losers do.

nope-1004's picture

Fat lazy population that relies on foreign labor through the edict of a currency reserve is due for a wake-up.

And I gotta tell ya, it's going to be fugly for the average american, who can't do anything for themselves.

 

tmosley's picture

>Yuan convertible to gold

Doesn't this just mean that they take yuan on the exchange? Calling it "backing" is disengenuous as fuck. Yuan are "convertible" into bitcoin too.

The Cooler King's picture

It's always easy 'getting in' to something.

 

Sometimes, 'getting out' is more tricky.

sincerely_yours's picture

Hopefully, that CHINA move will awaken America for having destroyed the $US. http://wp.me/p4OZ4v-2GY

Manthong's picture

 

I wonder how valuable any ethereal fiat or trustless, open ledger proof-of-scam and highly penetrated / surveilled crypto will be if the S ever HTF.

 

sickavme's picture

Would be dumb to go thru with this.

First of all, nobody knows how much gold china really has.

Second of all, is china trustworthy? (pretty much know the answer to that one)...

 

This little trick won't last long by itself... However, we just pushed russia to have a gander at joining china in this endeavor just for fuckin us over with this bullshit that the leftards are pulling.

And once russia joins in, its all over... They will roll over like dominoes.

Manthong's picture

 

China likely has 5 or 6 times Au what it admits to.

But gold schmold…..

If it is not backed up by the fantasy bits of crypto or the fantasy bytes of fiat, you ain’t got nothing but some barbarous relic hard metal asset that does not need electricity or a dictatorial government to determine its value.

When the SHTF the poor saps who are filthy with gold and silver will be taught a thing or two.

BennyBoy's picture

 

FED: We're dooooomed! The petrodollar is going down in flames!

CIA: Must start war with China. How about using NK as a pretext?
Afghanistan's border with China? Farkhor Air Base in Tajikistan? Release the US Air Base in Manas, Kyrgyzstan? Then the CIA could help the western part of China to break away. Genius!

MIC: Bomb bomb bomb! But pay us with Yuan-Priced Crude Oil Benchmark Backed By Gold

BandGap's picture

They just rocks anyways.

https://www.youtube.com/watch?v=SrmHAjYZr9w

We gonna be fine, jus fine.

Manthong's picture

 

Cruf…

I am stuck in a well-enforced bunker with gobs of preps

..and you tell me the dollar is losing value ?????

F the bank of Israel and all of their banker sycophants.

Manthong's picture

 

Crud…

I am stuck in a well-enforced bunker with gobs of preps

..and you tell me the dollar is losing value...  ?????

F the bank of Israel and all of their banker sycophants.

 

duo's picture

"If they hit that bullseye the rest of the dominoes will fall like a house of cards. Checkmate."

Uncle Sugar's picture

Glad the boys confirmed the gold in Ft Knox is still there

 

/sarc (for the academics)

tmosley's picture

>tfw no arguments, meaning everyone, including the crayzies, realize this is a nothingburger

Feels bad man.

Clashfan's picture

tmosely: Doesn't this just mean that they take yuan on the exchange? Calling it "backing" is disengenuous as fuck. Yuan are "convertible" into bitcoin too.

yup +1

gotta sell news

localsavage's picture

It all sounds good until people start asking for gold instead of Yuan...then another FIAT scheme shits the bed.  No one has enough physical gold to do all of the oiltrades in gold.  On

tmosley's picture

Now THERE is a good argument.

Bears close watching. Petrogold indeed.

Dame Ednas Possum's picture

There's none so blind as those who refuse to see. 

 

 

tmosley's picture

What do you think I am not seeing now?

You just used an old saying with basically no context.

Dame Ednas Possum's picture

Der! Like fucking price movement in PMs to account for demand you dolt. 

You need to take a chill pill fella and open that sleepy eye on your avatar. 

Your mindless obsession with cryptos is blinding you to common sense rationality... and it's nauseating. 

Anybody who has scored on BitCoin et al. over the last year or so is an utter fool if they don't cash-in 80-90% of their holdings immediately and pour it into real assets... especially PMs. 

tmosley's picture

Christ are you butthurt.

Go cry it out on someone else's shoulder.

Dame Ednas Possum's picture

Ok ok... sure thing little man. 

Life must be just grand for you, lugging around that mountainous chip on your shoulder. 

I used to think your comments were worth reading... but clearly you're lost to the Church of Cryptology. 

Good luck.  You'll need it, what with your juvenile disposition and all. 

 

StychoKiller's picture

Non Sequitir, if a Toz of AU is priced at 2,000,000 yuan, then China goes swimin' in barrels of oil.

Besides it's China that's buying the oil for THEIR Country, NOT the entire World!  As long as the Chinese have enough Au to buy the oil, they could do so.

chubbar's picture

This is exactly correct, IMO. First, this isn't anything but what has already been announced months ago. China has set up their gold exchange to accept Yuan and is buying oil from Russia (and IRAN through Russia) with Yuan. The Exchange allows Russia/Iran to exchange their Yuan for gold, so essentially they are buying oil with gold because Russia/Iran have no reason to stockpile Yuan and will most likely convert Yuan to gold at the sale.

Secondly, this isn't a problem UNLESS the demand for gold isn't reflected in its' price, which those of us who feel it has been suppressed through paper derivitives think is the case. Now, either the Chinese are rapidly approaching what they consider to be a reasonable hoard of gold so figure it's time to pull the curtain back on this scam, OR, they are merely getting ready for some future development and this just sets the table for that.

I don't think either of those countries (Russia/Iran) were having issues sourcing gold for their oil through whatever exchanges they have access too. Iran has been going through Turkey for their gold unless that stopped recently.

Now, if you see the Saudis announce they are selling oil for Yuan, then you have a new development that is notable. This action (article) may or may not be a catalyst for gold to break out of the manipulation. I think we are getting close though.

 

chubbar's picture

One afterthought. With China being the main proponent of "One Belt, One Road" trade initiative, the ability to exchange Yuan for gold or more importantly, Yuan for Oil (through China or directly with Russia) could be a major catalyst for those countries joining that trade deal (which are MANY) to ditch the dollar since they no longer need to hold dollars to buy oil for their country.

This is most likely the concern of the US with this development. It certainly explains why Russia/Iran and to a lesser extent Syria (pipeline) are all of a sudden (relatively speaking) big threats to the US. In that regard, it may not matter all that much what the Saudis do.

Blankone's picture

And what happened to the articles many months ago going back over a year that claimed Russia was unleashing an alternative to SWIFT that would allow everyone to avoid the dollar? Even this article says China "is preparing to launch a crude oil futures", as in it still has not been made operational.

chubbar's picture

China and Russia do have an alternative system to SWIFT set up, as I understand it. I think it's called CIPS but may be mistaken about that part of it. Anyway, the Yuan for Gold exchange is ready for roll out and is reported to be starting this Oct, if I'm recalling correctly.

JohninMK's picture

As I understand it the Russian CIPS is an internal analogue of SWIFT but without external interfaces, yet.

The activation of the external interfaces would probably be regarded by the US as an act of war so will only be done when the US really has Russia's back against the wall.

Joiningupthedots's picture

I doubt very much Russia gives a rats ass what America thinks about its alternative SWIFT system.

This is the problem with many of you. You dont understand (or refuse to believe) you cant threaten Russia with anything except sanctions really. Hot war and they wie you out in under 24 minutes and thats a military fact.

There is no American unipolar rule anymore, Syria has proved that.

Theres nothing America can do about alternative SWIFT, oil for Yuan etc its real and happening.

Print as much Benjamins as you like but in the end they will be worth much the same as Brazilian or Argentine currencies....really they will!

11b40's picture

Agree with part of your thesis, but not this one:

"The Exchange allows Russia/Iran to exchange their Yuan for gold, so essentially they are buying oil with gold because Russia/Iran have no reason to stockpile Yuan and will most likely convert Yuan to gold at the sale."

Both countries have need of consumer goods, as well as many other things that China, the world's largest factory, produces.  The Yuan they acept for oil gets recycled back to China for real goods, so I would say they plenty of use for trading in Yuan.

G_T_A_44's picture

Very well said/articulated and yes, you will see the Saudis announce, as well as others in the region.

ThirteenthFloor's picture

Oil needs to float down in relative value, and gold needs to float up in relative value to a more realistic valuations. Fiat of course & other hypothications (i.e., GLD and OIL) need displacement. In other words, each needs to find their real market value which is radically different that what it is today. I see no problem will oil trading 250 barrels trading to an ounce of gold... in fact seems closer to PMV. One will need a helluva lot of CNY and USD to get Gold.

Caloot's picture

That is Bs.   Same tired argument against gold standard.   Yea not enough gold at 1300 an ounce.    Plenty of gold at 13000 an ounce. Go back to seventh grade math.

11b40's picture

Bingo.  Maff is hard.

HardAssets's picture

Not at the Crimex and City of London dollar quoted 'price'

True Blue's picture

No one has enough physical gold to do all of the oiltrades in gold.

Are you really that fucking stupid? Supply/demand. If 'nobody has enough physical gold' then the 'price' of physical gold will go up -or more accurately, the price of other commodities in relation to gold will go down.

malek's picture

"No one has enough physical gold to do all of the oiltrades in gold."

Luckily hat argument doesn't apply for cryptocoins!

Placerville's picture

Unless they repeg Yuan vs. Gold price.

Blue Dog's picture

Actually, they do. It just depends on price. The real price of gold is much higher than the official paper price. GLD sells 100 or 200 paper ounces for every ounce of gold that they really have. What if the real price of gold is $50,000 an ounce in today's money? That would solve it, wouldn't it?

Mr 9x19's picture

usually a nation depeging from petro dollar is wiped.

i can imagine a physical war within a year now if the article say truth

ThirteenthFloor's picture

True. But those have been weak (two bit) nations without very massive trade arrangements with US of A. War with China, mean wafers (chips) and PCBs used in all our computers ( including those in weapons and fucking Wall Street ) would be in short supply. Russia will align with China in the first four minutes of that war.