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For people saying that this is a sign of the dollar dominance ending consider this. Gold is valued in dollars. Oil is valued in dollars. Any gold for oil excha

For people saying that this is a sign of the dollar dominance ending consider this. Gold is valued in dollars. Oil is valued in dollars. Any gold for oil exchange will be decided by the going dollar rate of each. Counter parties and middlemen assisting this trade will be hedging their positions with dollar settled derivatives traded on deep and liquid dollar markets.

hmate9 4y ago
Gold isn’t valued in dollars. You can sell gold for any currency. Oil is primarily transacted with dollars because it’s the worlds reserve currency. But if that were to change to whatever, you can still sell your oil and gold for whatever the new dominant currency is. Meanwhile your dollar is (presumably in this case) worth way less in terms of buying power than when you first bought it.
- simple-thoughts 4y ago
  You can always barter anything for anything else, but how do you decide the rate to barter at? It’s determined by the rate for the most liquid markets for the two sides, because the price of an asset in the most liquid market is the price all other markets will follow. There just aren’t gold based markets that are even remotely comparable to usd ones, so the ratio of gold to oil is set by their respective rates in usd. To see an actual switch from usd to gold for valuing oil, you’d need to see the market liquidity migrate from usd/oil pairs to gold/oil pairs. Ghana making a political statement isn’t that.
themihai 4y ago
>> Gold is valued in dollars. Oil is valued in dollars. If a long term contract is signed it protects you from dollar's inflation/volatility as the contract used gold as currency. I think this is important as tomorrow Fed's decision is no longer that important for your energy costs. The more important part is that if enough contracts are signed in gold(highly unlikely given U.S's oil exports) then the dollar is no longer relevant to the oil price.
- thaumasiotes 4y ago
  > I think this is important as tomorrow Fed's decision is no longer that important for your energy costs. The Fed decision wasn't important to energy costs anyway, though. Oil is priced in dollars, but the price changes minute-to-minute. Whatever the Fed decides about the value of a dollar, the oil price will reflect that. If you're involved in a long-term contract involving the exchange of oil for dollars, then the Fed's decision can have a big impact on you. But that's true of all long-term contracts involving dollars; there's nothing special about the other side of the contract being oil.
  - themihai 4y ago
    >> The Fed decision wasn't important to energy costs anyway, though. Of course it was. Rate hiking makes the dollar more expensive for anyone buying dollars(to pay for the oil). Were they dealing with gold they would not have this issue. Not to mention if the buyer is a gold producer.
    - thaumasiotes 4y ago
      So what? Rates go up, dollars get more valuable, it's more expensive to buy dollars than it used to be, and each dollar buys more oil than before.
      - themihai 4y ago
        But only one entity prints dollars so that's the catch/unfair advantage of the U.S.
        samus 4y ago
        The Fed has a huge influence of course, since they are the largest issuer and politically close to the authority that determines what a dollar is. But Dollars are also created by other banks on their balance sheets, many of them outside the US.
        4y ago
thisiscorrect 4y ago
It's obviously possible to buy gold in non-USD currencies. So I think the gist of your comment applies to the dominance the US has over oil markets. So while the "petrodollar" era is still ongoing but its day seem numbered, e.g. by pushing Russia to seek other export markets besides the West, by the increasingly cool perception of the US by OPEC nations [1], etc. [1] https://www.forbes.com/sites/rrapier/2022/10/05/opec-thumbs-its-nose-at-president-biden/?sh=5ab628493f8e https://www.forbes.com/sites/rrapier/2022/10/05/opec-thumbs-...
- simple-thoughts 4y ago
  Not just oil markets- usd dominates gold markets as well. Russia will be selling oil to other countries at a “discount” but to what? The price of oil in usd which is why some counterparties consider the trade. If usd was losing dominance, countries would be offering a premium to purchase oil for something other than usd.
chewz 4y ago
Exactly... People confuse eurodollar market with dollars... What Ghana is doing is a symptom of global liquidity crisis not a dollar crisis... Ghana cannot print dollars... It is short dollars and would rather have more then less of dollars. So this situation makes dollar more wanted not less. Michaell Howell is an expert on Global Liquidity and does good job at explaing it. https://hiddenforces.io/podcasts/global-liquidity-matters-now-more-than-ever-michael-howell/ https://hiddenforces.io/podcasts/global-liquidity-matters-no...
rsync 4y ago
"For people saying that this is a sign of the dollar dominance ending consider this ..." I think you are mistaken. The technical fungibility of dollars/gold/oil is irrelevant. The requirement to sell other assets to buy dollars in order to settle oil is not a minor detail - it's the whole point ... ... and it would, indeed, be a sign of an erosion of US currency and trade dominance ... which is why it's not going to happen. Ghana will either not go through with this plan or they will proceed and pay an enormous economic and political price ... or worse.
- happyjack 4y ago
  You're indeed 100% right. I think a lot of HN programmer bros miss this point ... that being forced to settle in dollars is not a formality ... it's the whole point!

hmate9 4y ago

Gold isn’t valued in dollars. You can sell gold for any currency. Oil is primarily transacted with dollars because it’s the worlds reserve currency. But if that were to change to whatever, you can still sell your oil and gold for whatever the new dominant currency is. Meanwhile your dollar is (presumably in this case) worth way less in terms of buying power than when you first bought it.

simple-thoughts 4y ago
You can always barter anything for anything else, but how do you decide the rate to barter at? It’s determined by the rate for the most liquid markets for the two sides, because the price of an asset in the most liquid market is the price all other markets will follow. There just aren’t gold based markets that are even remotely comparable to usd ones, so the ratio of gold to oil is set by their respective rates in usd. To see an actual switch from usd to gold for valuing oil, you’d need to see the market liquidity migrate from usd/oil pairs to gold/oil pairs. Ghana making a political statement isn’t that.

themihai 4y ago

>> Gold is valued in dollars. Oil is valued in dollars. If a long term contract is signed it protects you from dollar's inflation/volatility as the contract used gold as currency. I think this is important as tomorrow Fed's decision is no longer that important for your energy costs. The more important part is that if enough contracts are signed in gold(highly unlikely given U.S's oil exports) then the dollar is no longer relevant to the oil price.

thaumasiotes 4y ago
> I think this is important as tomorrow Fed's decision is no longer that important for your energy costs. The Fed decision wasn't important to energy costs anyway, though. Oil is priced in dollars, but the price changes minute-to-minute. Whatever the Fed decides about the value of a dollar, the oil price will reflect that. If you're involved in a long-term contract involving the exchange of oil for dollars, then the Fed's decision can have a big impact on you. But that's true of all long-term contracts involving dollars; there's nothing special about the other side of the contract being oil.
- themihai 4y ago
  >> The Fed decision wasn't important to energy costs anyway, though. Of course it was. Rate hiking makes the dollar more expensive for anyone buying dollars(to pay for the oil). Were they dealing with gold they would not have this issue. Not to mention if the buyer is a gold producer.
  - thaumasiotes 4y ago
    So what? Rates go up, dollars get more valuable, it's more expensive to buy dollars than it used to be, and each dollar buys more oil than before.
    - themihai 4y ago
      But only one entity prints dollars so that's the catch/unfair advantage of the U.S.
      - samus 4y ago
        The Fed has a huge influence of course, since they are the largest issuer and politically close to the authority that determines what a dollar is. But Dollars are also created by other banks on their balance sheets, many of them outside the US.
      - 4y ago

thisiscorrect 4y ago

It's obviously possible to buy gold in non-USD currencies. So I think the gist of your comment applies to the dominance the US has over oil markets. So while the "petrodollar" era is still ongoing but its day seem numbered, e.g. by pushing Russia to seek other export markets besides the West, by the increasingly cool perception of the US by OPEC nations [1], etc. [1] https://www.forbes.com/sites/rrapier/2022/10/05/opec-thumbs-its-nose-at-president-biden/?sh=5ab628493f8e https://www.forbes.com/sites/rrapier/2022/10/05/opec-thumbs-...

simple-thoughts 4y ago
Not just oil markets- usd dominates gold markets as well. Russia will be selling oil to other countries at a “discount” but to what? The price of oil in usd which is why some counterparties consider the trade. If usd was losing dominance, countries would be offering a premium to purchase oil for something other than usd.

chewz 4y ago

Exactly... People confuse eurodollar market with dollars... What Ghana is doing is a symptom of global liquidity crisis not a dollar crisis... Ghana cannot print dollars... It is short dollars and would rather have more then less of dollars. So this situation makes dollar more wanted not less. Michaell Howell is an expert on Global Liquidity and does good job at explaing it. https://hiddenforces.io/podcasts/global-liquidity-matters-now-more-than-ever-michael-howell/ https://hiddenforces.io/podcasts/global-liquidity-matters-no...

rsync 4y ago

"For people saying that this is a sign of the dollar dominance ending consider this ..." I think you are mistaken. The technical fungibility of dollars/gold/oil is irrelevant. The requirement to sell other assets to buy dollars in order to settle oil is not a minor detail - it's the whole point ... ... and it would, indeed, be a sign of an erosion of US currency and trade dominance ... which is why it's not going to happen. Ghana will either not go through with this plan or they will proceed and pay an enormous economic and political price ... or worse.

happyjack 4y ago
You're indeed 100% right. I think a lot of HN programmer bros miss this point ... that being forced to settle in dollars is not a formality ... it's the whole point!