Guru watch: buy gold ahead of China's big currency move

China has steadily been building “a renminbi-based international payments system", says Charles Gave, founding partner and chairman of Gavekal.

China “wants to put gold back at the centre of the global payments system”, argues Charles Gave, chairman of investment research provider Gavekal. This is one of the driving forces behind its recent move to take control in Hong Kong.

Since 2005, the US has increasingly “weaponised” the dollar, using its position as the global reserve currency to exclude both nations and individuals from the global financial system. In response, China has steadily been building “a renminbi-based international payments system” based in Hong Kong and backed by its laws – thus the “new national security law” is partly driven by China’s goal of securing “national financial security”. 

Sceptics argue “that the Chinese Communist Party will never open the country’s capital account” (allowing the free movement of renminbi around the globe). So, they claim, the idea that it will become an international currency and a challenger to the US dollar’s status remains remote. But there is a way around this – to make the renminbi exchangeable for gold, but “at a market price, rather than at a fixed price, as the US did after 1944”. After all, while “no one knows how much gold China owns,” it is the world’s biggest gold producer. 

So when might this happen? Most likely China will act only when the fiscal and monetary policies of Western countries have reached the end of the road and “visibly fail”. How should investors prepare? Among other things, buy physical gold, gold miners and commodity producers.

Recommended

Private pensions: act early to avoid a big inheritance tax bill
Pensions

Private pensions: act early to avoid a big inheritance tax bill

Frozen inheritance-tax thresholds mean HMRC is taking ever more in death duties. But there are steps you can take to avoid it, says David Prosser.
18 May 2022
Should you buy Vodafone shares, or steer clear?
Share tips

Should you buy Vodafone shares, or steer clear?

Vodafone grew revenue by 4% and profit by 11% last year, and offers investors a 6.4% dividend yield. So should you buy Vodafone shares? Rupert Hargrea…
17 May 2022
2021 Château La Mascaronne rosé: a work of art from Provence
Wine

2021 Château La Mascaronne rosé: a work of art from Provence

This wine soars above all others with its grace, refinement and impressively long finish
17 May 2022
The UK jobs market is still red hot – but will it last?
UK Economy

The UK jobs market is still red hot – but will it last?

For the first time ever, there are more job vacancies than people to fill them, and wages are rising at a decent clip. But that might just be a tempor…
17 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022