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Updated 22:42 21/10/20

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Will gold become part of the new SDR?

Duncan Richardson, News Editor
25 Mar 2015, 11:38 a.m.

In September 2014 The Shanghai Gold Exchange was officially launched with the purpose of internationalising both the Chinese gold market and renminbi. China is opening up its markets and starting to spread its influence around the world at the expense of US dollar hegemony.

The renminbi is widely expected to be added to the IMF’s Special Drawing Rights basket later this year. With China heading up the Asian Infrastructure Bank, the rival to the U.S. World Bank, the world monetary order is heading east.

The SDR was invented following the collapse of the London Gold Pool in 1969 and is comprised of U.S. dollars (41.9%), euros (37.4%), British pound (11.3%) and the Japanese yen (9.4%). The proportion allocated to each currency represents their prominence in terms of world trade. In 2009 the head of the People Bank of China called for the SDR to replace the U.S dollar to achieve financial and economic stability.

Many gold analysts believe the Chinese would like to add gold to the basket of currencies under a new revised SDR. This would help to explain why the Chinese are purchasing such large amounts of gold. If gold was added the renminbi would have a massive advantage over the other currencies in the basket as it would be convertible into gold via the Shanghai Gold Exchange.

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