The Chinese are preparing to launch an oil futures contract denominated in yuan and redeemable in gold. That is very bad news for the petro-dollar and for U.S. hegemony in the oil trade. The ability to sell oil on Chinese exchanges for yuan will take the potency out of U.S. sanctions levied on nations such as Russia and Iran.
The gold backing of those contracts figures to lure participants from around the globe – even those with strong ties to the U.S. This additional enticement will go a long way toward allaying concerns of those who may see the dollar as superior to the yuan in trade.
The move is another sign of the Chinese commitment to ending the dollar’s reign as the world reserve currency.
The oil contract, to be traded on the Shanghai International Energy Exchange, will be the China’s first futures contract which is open to international firms for trading. There is no official word on when the contract will launch, but testing has been underway since July.