What would happen if Russia pegged the Chinese yuan to gold?If Putin goes ahead with pegging the Chinese Yuan to gold instead of the US Dollar a number of things can happen.
Factor #1: US Dollar will be challenged
This will for the first time, challenge the US dollar's status as the world's dominant reserve currency. People may look to invest elsewhere, which could cause instability.
Factor #2: Domino effect
There could be an effect where other countries may follow suit and start pegging not only YUAN but maybe even their currencies to gold as well.
Factor #3: Yuan could be the next reserve currency
This move could be the start of Chinese yuan’s step to power and control. It could get to the stage where the value of the yuan would be determined by the price of gold, rather than the value of the US dollar.
Factor #4: Demand will pick up and other countries will hold gold
This move could result in countries increasing their gold reserves, which could lead to a further increase in the demand for gold. The demand for gold would increase, which could drive up the price of gold in the short term.
Factor #5: Bad for the US dollar
The US dollar would likely depreciate against other major currencies, such as the euro and yen, as investors shift their focus away from the dollar. The US would face increased competition in international trade, as other countries begin to use the yuan as a reserve currency instead of the dollar.
Factor #6: More power for China
China's economic power would increase, as it becomes more closely tied to the global gold market.
Factor #7: Strong partnership between Russia and China
Not only will Putin and Xi be making more crepes together, they will also be making more gold. The move would also strengthen Russia's position in the global financial system, as it becomes a key player in the gold market.
Factor #8: The shift of the New World Order
The stability of the global financial system would be threatened, as it adjusts to a new world order with a different reserve currency. Also the move could lead to increased geopolitical tensions, as countries jostle for position in a new world order dominated by gold instead of the US dollar.
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