Shayne Heffernan as an Economist, trader and venture capitalist writes about a possible gold backing of the Chinese Renminbi.
If one compares the dollar amount of base money with the gold reserves, it shows that the dollar is only covered to 16 percent now, in 1980 that number was 168% - because the price of gold has risen so much.If we want to go in the direction of a complete recovery, it would theoretically increase the price of gold at $ 10,000.
Shayne Heffernan believes the idea is of a Gold backed RMB is not an absurdity given the economic and political dynamic between China and the USA. A Gold Standard would be China's way of becoming the Global Reserve Currency, and thus the centre of the financial world.He believes that the early Gold holdings of the U.S. was an important reason why the dollar became the world currency. China currently has officially 1.8 percent of its reserves in gold - about 1,000 tons. But he thinks they have much more informally. They are the largest producer and consumer of gold today. The wealth moves from West to East, and thus the gold flows to the east. You can see that the gold purchases by central banks in Asia.
Live Trading News expert analysis team expects further price increases and price target is $2500 in 2015, based the return of gold in the international monetary system and the continuing devaluation of all currencies.
No Bubble in Gold
According to the Live Trading News expert analysis team, there is no bubble in Gold. In euro terms, gold prices in the last twelve months have rallied 26 percent and Live Trading News think in general that the price of gold in both the euro and the dollar terms has not hit a real high. Every great bull market ends in an exaggerated parabolic phase, this is still a fair way away.
The target price Economist Shayne Heffernan issued in 2010 was $2,000. Gold rose quickly to 1,925 dollars, a high in terms of the current USD. We remain convinced that gold is still undervalued. To calculate a price target is almost pointless, the value is always subjective. How much does a glass of water for me is worth depends greatly on how thirsty we are. So we would say you should not see the nominal price of gold as a standard. But set in the first place gold in relation to other asset classes.
Six years ago there were calls Gold is in a bubble, gold is far too expensive, and so on. What we notice is an ongoing value of gold relevant to other items like real estate, auto's etc. Now as a result of a financial crisis gold resumes its rightful place as a currency. Six years ago, gold was still only seen as a commodity. Now we consider it a clear alternative to paper currencies. What it shows is that companies also park some of their cash in gold today. This is the increasingly intense debate over whether we should go back to a certain gold backing of the monetary system. Gold is once again politically correct, you might say.
There can be no shortage of gold while there is free trade in the commodity. When gold price of $ 2,300 or 5,000 or 10,000, it's primary use is only to store value.
There can never be a shortage of gold as the gold is never consumed. One of the biggest misconceptions in the gold sector is the overvaluation of the annual gold production. The concept is not relevant for pricing. T
The storage demand determines the price, the balance of the Bank of England's gold reserve has increased by more than 300 percent since the financial crisis broke. That there is no external price factors in gold, builds trust.
Here in Asia, we all buy gold and keep it at home or in a safe deposit box as a form of security. In the West, gold is dubbed only as an investment for pessimists and doomsayers. T
Gold is bought in Asia because of a deep cultural and historical affinity - it has a very different role here. For the Indian bride's dowry gold is always - and also an insurance policy. In India there are 21 words for gold. The disposable income in China and India in recent years increased almost as much as the price of gold. So we can say that gold is not for Indians and Chinese have become more expensive.
Follow us on LinkedIn