Russia & China Are Now Creating A Separate Gold Market Away From The Dollar

China took another step to boost the yuan’s global usage, saying it will start direct trading with the Swiss franc, as the nation pushes its case for reserve-currency status at the International Monetary Fund.

The link will start on Tuesday, the China Foreign Exchange Trade System said in a statement, making the franc the seventh major currency that can bypass a conversion into the U.S. dollar and be directly exchanged for yuan. The rate will be allowed to fluctuate a maximum 5 percent on either side of a daily fixing, according to CFETS.

“This is an important step in strengthening bilateral economic and trade connections between China and Switzerland,” the People’s Bank of China said in a statement on its website on Monday. The link will help lower conversion costs and facilitate the use of both currencies in bilateral trade, it added.

The announcement, which confirmed an earlier report, comes as the IMF prepares to meet this month to review its Special Drawing Rights. The executive board of the Washington-based institution will gauge whether the Chinese currency has fulfilled the criterion of being "freely usable," after rejecting its bid in 2010. The other major currencies that can be directly converted into yuan are the U.S., Australian and New Zealand dollars, the British pound, the Japanese yen and the euro.

The PBOC this year extended Switzerland a 50 billion yuan ($7.9 billion) quota under the Renminbi Qualified Foreign Institutional Investor program, which allows yuan raised offshore to be used to buy securities in China’s domestic markets. In 2014, the Swiss and Chinese central banks signed a three-year currency-swap agreement that can be used to borrow as much as 150 billion yuan.

Globally, gold demand declined 2 per cent to 929 tonnes during the quarter. Central banks were net buyers of gold for the 15th consecutive quarter, buying 93 tonnes (101 tonnes) during Q3FY14. The Swiss government is to hold a referendum in end-November to mandate the holding of 20 per cent of their reserves in gold as against 8 per cent levels. If passed, Switzerland would need to buy around 1500 tonnes of gold over five years for a stronger gold-backed currency. "The holding of a referendum is in itself an affirmation of the increasing importance of gold globally," Mr. Somasundaram said.

Wikileaks has revealed how China has been adapting to holding too much US debt. It seems they've also managed to find a way to undermine the US dollar as a the world's reserve currency at the same time.