Submitted by Ronan Manly, BullionStar.com
One of the most notable events in Russia’s precious metals market calendar is the annual “Russian Bullion Market” conference. Formerly known as the Russian Bullion Awards, this conference, now in its 10th year, took place this year on Friday 24 November in Moscow. Among the speakers lined up, the most notable inclusion was probably Sergey Shvetsov, First Deputy Chairman of Russia’s central bank, the Bank of Russia.
In his speech, Shvetsov provided an update on an important development involving the Russian central bank in the worldwide gold market, and gave further insight into the continued importance of physical gold to the long term economic and strategic interests of the Russian Federation.
Firstly, in his speech Shvetsov confirmed that the BRICS group of countries are now in discussions to establish their own gold trading system. As a reminder, the 5 BRICS countries comprise the Russian Federation, China, India, South Africa and Brazil.
Four of these nations are among the world’s major gold producers, namely, China, Russia, South Africa and Brazil. Furthermore, two of these nations are the world’s two largest importers and consumers of physical gold, namely, China and Russia. So what these economies have in common is that they all major players in the global physical gold market.
Shvetsov envisages the new gold trading system evolving via bilateral connections between the BRICS member countries, and as a first step Shvetsov reaffirmed that the Bank of Russia has now signed a Memorandum of Understanding with China (see below) on developing a joint trading system for gold, and that the first implementation steps in this project will begin in 2018.
Interestingly, the Bank of Russia first deputy chairman also discounted the traditional dominance of London and Switzerland in the gold market, saying that London and the Swiss trading operations are becoming less relevant in today’s world. He also alluded to new gold pricing benchmarks arising out of this BRICS gold trading cooperation.
BRICS cooperation in the gold market, especially between Russia and China, is not exactly a surprise, because it was first announced in April 2016 by Shvetsov himself when he was on a visit to China.
At the time Shvetsov, as reported by TASS in Russian, and translated here, said:
“We (the Central Bank of the Russian Federation and the People’s Bank of China) discussed gold trading. The BRICS countries (Brazil, Russia, India, China and South Africa) are major economies with large reserves of gold and an impressive volume of production and consumption of the precious metal. In China, gold is traded in Shanghai, and in Russia in Moscow. Our idea is to create a link between these cities so as to intensify gold trading between our markets.”
Also as a reminder, earlier this year in March, the Bank of Russia opened its first foreign representative office, choosing the location as Beijing in China. At the time, the Bank of Russia portrayed the move as a step towards greater cooperation between Russia and China on all manner of financial issues, as well as being a strategic partnership between the Bank of Russia and the People’s bank of China.
The Memorandum of Understanding on gold trading between the Bank of Russia and the People’s Bank of China that Shvetsov referred to was actually signed in September of this year when deputy governors of the two central banks jointly chaired an inter-country meeting on financial cooperation in the Russian city of Sochi, location of the 2014 Winter Olympics.
Deputy Governors of the People’s Bank of China and Bank of Russia sign Memorandum on Gold Trading, Sochi, September 2017. Photo: Bank of Russia
National Security and Financial Terrorism
At the Moscow bullion market conference last week, Shvetsov also explained that the Russian State’s continued accumulation of official gold reserves fulfills the goal of boosting the Russian Federation’s national security. Given this statement, there should really be no doubt that the Russian State views gold as both as an important monetary asset and as a strategic geopolitical asset which provides a source of wealth and monetary power to the Russian Federation independent of external financial markets and systems.
And in what could either be a complete coincidence, or a coordinated update from another branch of the Russian monetary authorities, Russian Finance Minister Anton Siluanov also appeared in public last weekend, this time on Sunday night on a discussion program on Russian TV channel “Russia 1”.
Siluanov’s discussion covered the Russian government budget and sanctions against the Russian Federation, but he also pronounced on what would happen in a situation where a foreign power attempted to seize Russian gold and foreign exchange reserves. According to Interfax, and translated here into English, Siluanov said that:
“If our gold and foreign currency reserves were ever seized, even if it was just an intention to do so, that would amount to financial terrorism. It would amount to a declaration of financial war between Russia and the party attempting to seize the assets.”
As to whether the Bank of Russia holds any of its gold abroad is debatable, because officially two-thirds of Russia’s gold is stored in a vault in Moscow, with the remaining one third stored in St Petersburg. But Silanov’s comment underlines the importance of the official gold reserves to the Russian State, and underscores why the Russian central bank is in the midst of one of the world’s largest gold accumulation exercises.
1800 Tonnes and Counting
From 2000 until the middle of 2007, the Bank of Russia held around 400 tonnes of gold in its official reserves and these holdings were relatively constant. But beginning in the third quarter 2007, the bank’s gold policy shifted to one of aggressive accumulation. By early 2011, Russian gold reserves had reached over 800 tonnes, by the end of 2014 the central bank held over 1200 tonnes, and by the end of 2016 the Russians claimed to have more than 1600 tonnes of gold.
Although the Russian Federation’s gold reserves are managed by the Bank of Russia, the central bank is under federal ownership, so the gold reserves can be viewed as belonging to the Russian Federation. It can therefore be viewed as strategic policy of the Russian Federation to have embarked on this gold accumulation strategy from late 2007, a period that coincides with the advent of the global financial market crisis.
According to latest figures, during October 2017 the Bank of Russia added 21.8 tonnes to its official gold reserves, bringing its current total gold holdings to 1801 tonnes. For the year to date, the Russian Federation, through the Bank of Russia, has now announced additions of 186 tonnes of gold to its official reserves, which is close to its target of adding 200 tonnes of gold to the reserves this year.
With the Chinese central bank still officially claiming to hold 1842 tonnes of gold in its national gold reserves, its looks like the Bank of Russia, as soon as the first quarter 2018, will have the distinction of holdings more gold than the Chinese. That is of course if the Chinese sit back and don’t announce any additions to their gold reserves themselves.
The Bank of Russia now has 1801 tonnes of gold in its official reserves
A threat to the London Gold Market
The new gold pricing benchmarks that the Bank of Russia’s Shvetsov signalled may evolve as part of a BRICS gold trading system are particularly interesting. Given that the BRICS members are all either large producers or consumers of gold, or both, it would seem likely that the gold trading system itself will be one of trading physical gold. Therefore the gold pricing benchmarks from such a system would be based on physical gold transactions, which is a departure from how the international gold price is currently discovered.
Currently the international gold price is established (discovered) by a combination of the London Over-the-Counter (OTC) gold market trading and US-centric COMEX gold futures exchange.
However, ‘gold’ trading in London and on COMEX is really trading of very large quantities of synthetic derivatives on gold, which are completely detached from the physical gold market. In London, the derivative is fractionally-backed unallocated gold positions which are predominantly cash-settled, in New York the derivative is exchange-traded gold future contracts which are predominantly cash-settles and again are backed by very little real gold.
While the London and New York gold markets together trade virtually 24 hours, they interplay with the current status quo gold reference rate in the form of the LBMA Gold Price benchmark. This benchmark is derived twice daily during auctions held in London at 10:30 am and 3:00 pm between a handful of London-based bullion banks. These auctions are also for unallocated gold positions which are only fractionally-backed by real physical gold. Therefore, the de facto world-wide gold price benchmark generated by the LBMA Gold Price auctions has very little to do with physical gold trading.
Conclusion
It seems that slowly and surely, the major gold producing nations of Russia, China and other BRICS nations are becoming tired of the dominance of an international gold price which is determined in a synthetic trading environment which has very little to do with the physical gold market.
The Shanghai Gold Exchange’s Shanghai Gold Price Benchmark which was launched in April 2016 is already a move towards physical gold price discovery, and while it does not yet influence prices in the international market, it has the infrastructure in place to do so.
When the First Deputy Chairman of the Bank of Russia points to London and Switzerland as having less relevance, while spearheading a new BRICS cross-border gold trading system involving China and Russia and other “major economies with large reserves of gold and an impressive volume of production and consumption of the precious metal”, it becomes clear that moves are afoot by Russia, China and others to bring gold price discovery back to the realm of the physical gold markets. The icing on the cake in all this may be gold price benchmarks based on international physical gold trading.
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This article originally appeared on the BullionStar.com website under the same title "Russia, China and BRICS: A New Gold Trading Network".
THIS, or Unlimited Paper Futures ???
Which will it be, James ...
Thr Chinese yuan is less popular than the Australian Dollar as a reserve curency
The noose seems to be tightening on petrodollar supremacy...
https://olduvai.ca
http://thesoundingline.com/is-the-dollar-losing-its-reserve-currency-sta...
the reason the usd is the largest component of foreign reserves is the huge current account deficit the usa has with the rest of the world, the need for dollars to transact international business(oil) and protection against there own currency disruption(protection against predatory finance, i.e., thai baht 1997).
china has swap agreements with al its trade partners except the usa. there are estimates that the yuan may be used in as much as 10% of foreign business but most of it is a wash because the current account is almost zero with all of its trade partners ex-usa. the trade deficit with the usa is the primary reason there is so much chinese money buying real estate and other usa assets.
WHY AREN'T THEY STARTING A BUTTCOIN TRADING NETWORK??
WHY OH WHY??
WHAT?? I thought it was just a pet rock, barberous relic???
We buy their lead based shit consumables and in return to reduce the trade defecit we let them buy up our real assets. Connection made. Thanks besnook!.
Spot deals on silver. Cheap gold
https://findbullionprices.com
Where is it written that the world's foremost trading/manufacturing/exporting nation must hold reserve currency status in order to drive other nations to use its own currency, backed buy an amount of physical gold which outnumbers the U.S. by upwards of 3X...?
First, the bad news.... America is the proverbial RMS Titanic and we struck the iceberg years ago.
Now, the good news! If you hurry, you can still get a song request in to the band playing on the promenade deck just above the water line. Hurry though!!!
Here's how the new India-Russia-China triangle trade will work:
China will import tungsten mined by Indian coolies for its coin mills.
Russia will trade China 24kt gold foil to laminate and strike faux coins.
Chinese faux gold coins will be sold by Russia to India to pay for more
tungsten blanks. India will repatriate the faux gold coins into the USA
through their sleeper network of 1,000,000s of H-1B Hindus, and trade
them with Bank of London to obtain pound sterling credits to continue
privatization of the best India industries and prime farmland. From
Bank of London, these faux gold coins now have a 1W provenance,
and be sold on all the US PM exchanges. It's a proven business plan.
Trump approves it!!
fraud in financials..tell me it isn't so
One post to troll them all.
I buy weed from my my non state sanctioned supplier, some folks call them dope dealers. One day he substitutes oregano. Guess who is looking for a new customer? Buy your metals from a reputable bullion dealer or LCS whose livelihood depends on not selling tungsten. Or, be a dumbass and buy on ebay from a Chinese seller and maybe get counterfeit.
Don't be an idiot. Resonance test your bullion coins with the Android app "bullion test" before you even buy them at your LCS.
They are getting tired of funding the US and its military, which seeks to subjugate them.
I thought they were just getting tired of some certain assholes dumping a couple of million ounces at midnight.
hmmmm//time to buy gold?
That was the last 3-4 years. The memo tells me that time to do so is running out !
Russia and China are no dummies. They accumulate/stack just as much as possible without completly upsetting the "market" (bust of the CONeX/LBMA-duality that is leveraged 200+ paper claimes to every available ounce or silver and gold). For now shrimps have still the oppurtunity to pick up crumbs in the tailwind of these giants, but time is running short. tick tock tick tock...
By early 2011, Russian gold reserves had reached over 800 tonnes, by the end of 2014 the central bank held over 1200 tonnes, and by the end of 2016 the Russians claimed to have more than 1600 tonnes of gold.
All paid for with American paper bills despite the import ban.
No
Officially, unofficially some informed sources say China already has approx. 40k tonnes stockpiled
and Russia slightly more.Real gold holdings are secrets better kept than ICBM launch codes.
Gold is the only acceptable currency between nations in wartime,BTC is not going to fill that space.
Who's the hot Brit in the photo? Brits, still behind everything, post-HongKong. Traitors.
Yea!
But hold your horses, just look at the pic. Three females and stud.
Important things are not decided by these types.
Even if it succeeds, without an active (real) metal trading market it just will be another paper market, strong armed by the government.
Do you see any legal entities, individual or corporate, in these contries that will be allowed to make large unfettered gold transactions?
I thought so.
Yes, I wonder just how free the citizens are of those countries to buy, sell and move their gold as they see fit.
Do it. Fuck the Comex and LBMA.
Why kill the goose while you can still get yellow eggs ?
Do it. Fuck the Comex and LBMA.
"...the world’s two largest importers and consumers of physical gold, namely, China and Russia."
Ehm, what happened to India? I know they've tried to crack down on imports, but have they actually been that successful?
No. India is still no.2 consumer and importer
Thats good news for bitcoin
I’m certain this story will never be reported in the US press.
Gold, Silver & Cryptos will prevail
Does it mean that we can finally get rid of Britian's "London FIX" and establish a market?
Think so. I mean what can they do gold surging at BRICS market.
Interesting is future gold plan....its not gonno stop here.
Coordinated gold backed currency (yuan/ruble) killing US world status currency. US going down the drain as $ gets killed or panic back $ to gold....again to survive.
Buckle up....bumpy ride...
I don't like "gold backed" currency. I want gold currency. In fact, I hate the currency laws. I want gold money.
Divorce physical gold from paper....crap.
Physical gold free to go....
Here's a good analysis revealing the real catalyst for Trump Armageddon:
"The true motive behind the wars in the Middle East is to maintain the US dollar as Reserve Currency and the Petrodollar as the unit of value for a barrel of oil. thus financing the US economy and its Military enforcement machine.
Russia and China have been dumping their US Treasury Bonds slowly and now trade between themselves in Gold, Yuan and rubles.
They have formed a new Financial system with the AIIB (Asian investment and Infrastructure Bank). They have formed a new Bank Clearing System, separate from SWIFT. They have their own credit card systems.
China is building the NEW SILK ROADS and sea arteries to connect the countries of ASIA to Europe. Trade along these routes will be in local currencies, bypassing the dollar.
The Silk Roads by-pass the US Navy’s control of the sea route choke points and make their carrier fleets largely redundant as enforcement tools..
For the Washington war machine, Syria is but a stop along the road to Iran, then up into Central Asia to cut and control the Silk Road and impose the US dollar toll charge.
The New Silk Roads spell the end of the US dollar as the dominant currency and the end of the US military and Financial hegemon.
Thus Syria is a major pivot point in World History and will be a war to the end. Empires die slowly and usually decay from within, but this may not be the case with the neocon psychopaths reluctant to concede power.
There are other US allies with interests in subduing Syria; Saudi and Qatar to build their gas pipeline to the Meditterean and onto the European Market, this undermines Russian near monopoly of supply and will undermine their already fragile economy.
Turkey with its grab for the corridor to the oilfields of Mosul and subjugation of its rebellious Kurds.
Israel and its Oded Yinon plan to break-up Syria and grab land, also to cut the Shia Crescent connecting Iran to Hezbollah in Lebanon.
European countries who are reliant on Russian gas energy supplies and wish to have another supply source from the Gulf States.
So there are many countries ready to feed on the carcass of Syria, if it is defeated."
This is surreal. Again, Armageddon is 60 miles from the Syrian Golan Heights. End times shit.
So if you have paper gold, convert it to currency (driving the price of gold down) and then into real gold. Quickly.
Excellent analysis.
Well getting a fair price for gold would make a nice change. But can they really get rid of the price rigging cartel in New York and London? Seems unlikely without a war.
They won't have to get rid of anything...
The Western 'cartels' will simply desiccate as trading nations gravitate towards the Belt & Road econo-bloc and leave them twisting in the wind.
Yep, I don't think they have to do anything. The paper certs are not redeemable for Russian or Chinese gold, they have to turn them in their banks.
I read awhile back that India has 11% of the world's gold, mainly with their populace.
I agree, but I am not sure what New York really has to do it. As others here have pointed out, what do we value it in if not the dollar? We have to measure value in some way. My argument would be that gold IS the benchmark but in a dollar sense that is where we are at now. Are they proposing that they can trade against the derivatives that are GLD and SLV and the other permutations? We would have FX issues as we do now but it would be interesting.
I'm fine with trading in rubles but not yuan because the Chinese peg it to the USD. We sort of end up right back where we started wouldn't we?
Trading in gold amongst themselves cannot be interpreted (nor passed off in mainstream press) as acts of terrorism against the U.S.
The art of war, as it were, is to avoid armed conflict.
However, when trading nations, one by one, begin to gravitate towards the Belt & Road and a stable, hard-asset backed currency/s, which encourage trade without color revolutions, the U.S. will be powerless to do anything.
In the meantime however, they'll die trying...
The top sociopaths of each of those nations still want gold as cheap as they can get it, which is why none of them get in the way of the gold price manipulations. Keeping gold unrepresentative of its real price means just about everything these sociopaths want comes to them cheaper. The only losers, as always, are the workers who produce the goods, whatever that might be.
It is still lyin' and stealin'.
A time will come when 1oz of gold will cost you 5 Bitcoins. But dont hold your breath..
america will crash so fucking hard i will spray my load all over the walls.
sorry not america, U S S A..
i would never disrespect america...but america doesnt exist anymore so just call it USSA