A thank you to a blog reader who informed me by email about this relevant news article. It appears that some officials are now talking more openly about using gold in an effort to bypass the US dollar over time. Below are a few excerpts.
-----------------------------------------------------------------------------------------------------------"Recent progress made in streamlining trade in local currencies has brought Moscow and Beijing closer to creating a financial architecture that could facilitate transactions in gold. "
. . . . .
"As we reported last week, Moscow and Beijing took another step towards de-dollarization with the opening of a yuan clearing bank in Russia. And earlier this month Russia's Central Bank opened its first-ever foreign branch in Beijing to allow for better communication between Russian and Chinese financial authorities.
According to an article published yesterday by Sputnik, progress made in promoting bilateral trade in yuan is the first step towards an even more ambitions plan — using gold to make transactions:
The clearing center is one of a range of measures the People's Bank of China and the Russian Central Bank have been looking at to deepen their co-operation.[...]One measure under consideration is the joint organization of trade in gold. In recent years, China and Russia have been the world's most active buyers of the precious metal.On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.
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Added note: Below is an excerpt from the Sputnik News article mentioned quoted above:
"In a sign of increasing ties, earlier this month Russia's Central Bank opened an office in Beijing. The branch is Russia's first in a foreign country and will exchange information with the Chinese financial authorities.
One measure under consideration is the joint organization of trade in gold. In recent years, China and Russia have been the world's most active buyers of the precious metal.
On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.
"We discussed the question of trade in gold. The BRICS countries are large economies with large gold reserves and impressive volumes of production and purchase of this precious metal. In China, gold is traded in Shanghai, in Russia, Moscow. Our idea is to create a link between these sites in order to intensify trade between our marketplaces," Shvetsov said."
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My added comments: This is the type of information we watch for here. It is additional confirmation that Russia and China are building up gold reserves as part of an overall strategic plan to lessen their reliance on the US dollar over time. The process tends to move slowly because China has a lot of US dollar based reserves. It's in their interest to first hedge those reserves with gold and then gradually reduce US dollar holdings so that they do not tank the US dollar rapidly hurting their own holdings. But it is pretty clear that the long term strategy is to move away from the US dollar and also reliance on the SWIFT system. Now we have officials stating that gold is viewed as being part of the process. At some point, this could lead into the kind of major monetary system changes we watch for here.
Added note: Another thank you to the reader in the comments below who provides this link related to this situation:
Also, a thank you to Dr. Judy Shelton who kindly retweeted a link to this article that I sent her. Dr. Shelton has an interest in what role gold might play in the future in the monetary system.I sent her a link to this article thinking she might have some interest in these news articles about the potential for gold use by Russia and China in the future.
Appreciate the chart and comments from Dan Popescu on this as well here.
Andy Hoffman offers additional commentary on this news from the perspective of a strong pro gold advocate. He calls the news a "bombshell". The reason this news is getting so much attention is because this is the first time I know of that we have seen credible news reports that Russian and Chinese officials are planning to include gold in their trade settlements. I have seen much internet speculation that China and Russia intended to create a gold backed currency, but could find no official endorsement of that idea. So this seems like a possible step in that direction and should be reported as significant news on that basis as I see it. Without a doubt, it needs to continue to be watched over time.
Added note 4-4-17: Lacker (Richmond Fed) resigns and admits involvement in a leak of confidential info. This means Trump gets to fill another Fed position. Jim Rickards adds this interesting Twitter comment on it.
News note 4-6-17: The news of the US missile strike on Syria did cause a little reaction in the gold market. However, the relatively muted reaction so far is likely because this move was pretty much telegraphed ahead of time and does not really come as a big surprise to markets. It is certainly true that geopolitical conflict can be a trigger to systemic instability, but it would take a much bigger event than this to generate anything like that. If you saw Russia take some kind of action in retaliation for example, that might get the markets more upset. If you see gold shooting up by $50 to $100 very quickly, then you know something more significant is taking place that has likely taken markets by surprise.
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