30 June 2023
The idea of the US dollar losing its reserve status, once considered controversial, is now openly discussed around the world. As China’s influence grows in global trade, they are increasingly pushing for the use of the yuan in trade transactions. If China demands that Australia trade in yuan instead of dollars, Australia may need to find uses for the excess yuan they accumulate. One possible solution is for Australia’s central bank to exchange the excess yuan for gold, a traditional asset held by central banks. With China’s substantial trade surplus, if even a portion of it is exchanged for gold, it could potentially drive the price of gold to $5,000 per ounce. Considering the risks associated with the dollar losing its dominance as the world’s reserve currency, gold can be seen as a valuable asset for hedging against such risks.