China Buys Oil With Gold-Backed Yuan Instead of USD

China is the world’s largest buyer/importer of oil (it passed the USA in 2017) and today made their first purchase of oil crude-futures contracts based in gold-backed Chinese Yuan instead of the USD.

This creates an Asian oil benchmark and allows oil exporters to bypass USD denominated benchmarks by trading directly in Yuan. In addition this also promotes and perhaps sets the stage for the Chinese currency to be used more in global trade instead of the USD.

Russia, Libya, Iran, and Saudi Arabia have expressed a desire to start trading oil for Chinese Yuan and gold instead of the US dollar.

Years from now this may mark the beginning of the end for the US dollar's domination of the global oil trade, but I would not expect to see the world changing too much overnight. Western contracts for oil from US West Texas and the UK’s North Sea will likely remain strong players for years to come. There is no need to panic as it will take some time for even a Gold-Backed Chinese Yuan to replace the USD as the world’s reserve currency.

This news of the first Chinese Yuan denominated Oil Futures contracts being sold on the Shanghai International Energy Exchange will likely put some downward pressure on the value of the USD as well as possibly lifting the value of gold and cryptocurrencies.