'While putting China on the same gold standard used by countries in the past is virtually impossible at today's price for the metal, that doesn't rule it out,' Bloomberg's global head of metals and mining research, Ken Hoffman told Kitco News.
Better-than-expected Chinese trade data eased some of the pessimism over the world's second-largest economy on Wednesday. The news comes after heavy intervention by Beijing to curtail recent declines in the Chinese yuan. Analysts estimate that the Chinese central bank may have sold $10 billion-$20 billion in the last week to prop up the yuan.
'China is quite the mess - they have had a very hard landing in the commodity space, there is no question about that, they can sprinkle all the 7% growth pixie dust on the Chinese economy they want, it doesn't exist,' Hoffman said.
He added, 'They need to soak up some of that M2 - so they should come out with a gold-backed yuan so they can soak up M2 capital or else you will see the yuan devalue, devalue, devalue.'
Markets were taken by surprise last week when the yuan unexpectedly fell. Chinese officials pushed the currency lower in response to a selloff in the country's equity market - the Shanghai Stock Exchange. As a result, global equities were vulnerable and gold prices moved higher on safe-haven appeal, pushing above $1,100 an ounce.