China warns gold could fall in US amid ‘fears’ of a ‘crisis’

China’s central bank has warned that gold could collapse in the United States in response to fears that a gold-backed currency could crash.

The People’s Bank of China said on Thursday it will step up the use of foreign currencies to counter US concerns about gold.

It warned that the value of the yuan could decline against the US dollar in the event of a currency crisis in the US, and warned that its policies would be “proportionate”.

“We should take care of the situation through appropriate monetary and fiscal policies,” the People’s Commissary of Foreign Exchange said in a statement.

It added that it would consider imposing limits on the exchange of yuan for gold, in line with the country’s “market-based monetary policy”.

“If gold or silver prices were to fall in the future, this will be a very big problem for China’s foreign exchange reserves, which are currently quite high,” said Wu Yongmin, head of research at Shanghai-based investment advisory firm Sotheby’s International Realty.

Gold and silver are the only commodities in the world that are backed by gold.

Gold is seen as a key asset for China to safeguard its long-term growth prospects, especially if the US devalues the yuan.

It’s not just the gold and silver that China wants to hold as reserves.

The country has also recently taken steps to boost its domestic manufacturing sector and boost the value-added sector, which includes everything from clothes to electronics, with plans to expand its state-owned industry.

Gold has long been a big part of the Chinese economy, accounting for around 10 per cent of exports and nearly 20 per cent in imports.

Its market value has also risen sharply in recent years due to the country being the world’s biggest importer of it.

In an apparent attempt to help support its exports, China has been importing more gold from the rest of the world, which in turn has helped drive the price of the metal to new heights.

The Chinese central bank is trying to reduce its reliance on foreign currencies and is also trying to push up the value added sector to keep up with demand.