Yuan as reserve to drive selloff in dollar and attract $1 tn influx

The possibility of China’s currency to become the IMF's global reserve currency is set to trigger a huge sell-off of the dollar and a massive flood of cash into the yuan.

Investors now need to plan for a flood of wealth undermining the dollar and moving into the yuan

According to a new research rendered by Goldco Precious Metals, at least $1 trillion in global currency reserve will flow into yuan assets once the International Monetary Fund decides to include it in the list of reserve currencies which currently consist of the dollar, euro, pound and yen.

As expected, this money will come from investors dumping the dollar. As the author of Goldco article says, for decades the dollar has been supported solely because it has been the default reserve for the world financial system. These days are now approaching an end, which spells catastrophe for the greenback.

Geoeconomics is what drives China's global strategy. China-led Asian Infrastructure Investment Bank has been among the most discussable events in the recent months, as it attracted dozens of U.S. traditional allies as its shareholders (those include the United Kingdom, Germany, Australia, etc.) and was considered a rival to the U.S.-dominated World Bank. The U.S. and Japan refused to join it referring to possible problems with its management.

China is moving systematically to assert themselves financially, and making their currency a global reserve is essential to that plan – one that will have severe, long-term consequences for America.

The IMF will consider whether to add the yuan to its basket of reserve currencies later in 2015,   It’s almost guaranteed that the IMF will vote yes.

Now, Standard Charter experts estimate that will trigger a staggering 6.2 trillion yuan, or $999 billion, buying spree of Chinese bonds by the end of 2020. Of the total $11.6 trillion stashed in global reserves, 10 per cent will ultimately flow into yuan assets, according to AXA Investment Managers.

It is almost guaranteed that the IMF will agree to include the yuan in its basket of the four reserve currencies later in 2015.

According to Standard Chartered calculations, including the yuan will spark as much as 6.2 trillion yuan ($999 billion) of net purchases of China’s onshore bonds by end the end of 2020.

AXA Investment Managers estimates that ten per cent of the $11.6 trillion of global reserves will be pumped into yuan assets. And this could trigger a reallocation of global reserves portfolios.

The renminbi has already risen to the fifth-most traded currency in the world.

Once the inclusion occurs, the buck is facing a possible freefall as its ‘special status’ as the world’s default reserve is damped.

And this is one of the reasons why many investors are focusing on purchasing physical gold and silver as a shelter asset against the coming collapse of the dollar.