Gold standard: Renminbi contracts available in Hong Kong

Historical Archive

This article is preserved as part of the historical record of this blog. It was originally written by Dr Willie (The Golden Jackass) and is republished here with permission as part of an ongoing effort to preserve historical economic commentary that has since become unavailable. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards.

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On Monday, the first gold contracts denominated in the Chinese Renminbi (also known informally as "yuan") came to the Hong Kong market. Analysts have been quick to note the implications of a yuan-denominated contract, realising that the new contract could drive nearly three times as much demand as the dollar-denominated contract.

Looking at the yuan product from the macro view, a move into gold is about more than just gold—it is about reserve currency status.

Whilst direct trading of the Chinese currency is prohibited, gold now offers investors the opportunity for exposure to the world's fastest growing economy.

An End to the Dollar's Monopoly

The US dollar has a monopoly as the world's reserve currency. The size and scope of the US economy and financial markets, combined with the relative stability of the political climate, made the US dollar the preferred currency for international trade.

However, the reason most cite for dollar dominance is not the United States' role in international commerce, but its monopoly over a single product—oil. In an agreement with Saudi Arabia, the United States effectively tied the global oil market to the US dollar. No other currencies could be used to purchase "black gold", the driver of modern industry.

Signs of Defiance

As China grows, it naturally wants to extend its reach as an economic powerhouse. Recently, in a move that rattled those who see the dollar as the only reserve currency, China agreed to trade oil and energy products with Russia in their own currencies. This should have been seen as a warning sign—a move that would lead to new policies designed to make the Renminbi a global currency for commerce.

Relative to other commodities, gold is relatively unimportant to commerce. Most of us can keep our cars running and factories operating without gold.

Renminbi Goes Global

Gold is a very important commodity in the realm of modern finance, however. By allowing the markets to buy gold denominated in the Chinese currency, investors can essentially exchange yuan directly for other currencies, using gold as a proxy.

That is to say, investors now have a binary trade through which they can buy and sell Renminbi. Buying the Renminbi requires holding a short gold position in yuan and a long gold position denominated in another currency. Once the gold is netted out by equal short and long positions, investors are left only with foreign currency exposure.

Never before has it been so easy for investors to buy and sell Chinese Renminbi directly or indirectly. Investors have long sought exposure to the rising Renminbi, but Chinese capital controls kept the currency as a primarily domestic institution. Now it is available to almost everyone and, with two simple transactions, sufficient Renminbi can be purchased, provided there is enough gold available to back each trade.

This is where the Chinese recognise the importance of gold. Allowing the yuan-denominated contract to trade will only increase investor appetite for other yuan-denominated commodities. While oil contracts may be a few months or years away, the reality is that China is positioning the Renminbi to become a world reserve currency. It is only a matter of introducing a few additional commodity contracts to attract the world's attention.

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Historical Archive Update

This page was updated on 26 July 2026. The content has been preserved as originally published. This update was undertaken solely to modernise the HTML markup, improve accessibility, correct obvious spelling mistakes and grammatical slips, update obsolete links where appropriate, and bring the page into line with current web standards.

Author: Dr Willie (The Golden Jackass). Republished with permission for historical preservation.