Russia, China, India Unveil New Gold Trading Network

Tyler Durden's picture

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.

*  *  *

This article originally appeared on the BullionStar.com website under the same title "Russia, China and BRICS: A New Gold Trading Network".

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Montgomery Burns's picture

I imagine most of them don't though. You think suckerburg owns phys? ( I mean real phys, in his possesion )

D-plorable's picture

The satanic money changers say thems is fighting words

Apeon's picture

All part of the effort to remove the U$ as medium of payment, and certainly may work!

JibjeResearch's picture

Gold?

Bawah ahahah ahahahhahaha

afronaut's picture

THAT'S exactly what they said during the dot com bubble. 250 / oz. It's going to 100 or lower they said. Luckily I kept buying as much as I could afford. Didn't sell at the top but, all my friends thought I was a genius. " how did you know" they said. Um when the experts say this time it's different you know that it never is. It's a useless paperweight, an old relic for jewellry, banks don't need it.

IDESofMARCH's picture

It currently at least takes 9.4 tons of earth to get 1 oz of gold in gold deposit zones. Gold cannot be printed like fiat monies or  click of a mouse on a blockchain to so called mine any one of over 1,000crypto currencies. Just about anyone can create another crypto currency, Wopper coin for burgers, Skin coin, Tit coin for you know what, bayard coin for backyard mechanics. Many digital haists have and will keep occurring along with site break downs. You need an army to steal an ounce of real gold. Pet rocks, tulips, cabbage patch dolls and crypto manias all end badly and then forgotten.  I bought and dumped my blockchain investments and will load up on GOLD. 

There's Global instability.

Disfunctional governments

Rockets ready and yearning for war

Weaker and weaker world monies. It's scary when an imaginary bitcoin or titcoin etc. wins over the US dollar value.

Maestro Maestro's picture

China, India and Russia are not the good guys either. In fact, China and Russia are only playing good cop, bad cop with their partners, the Americans and the Europeans.

China, like Russia, is not pro-gold and acts in collusion with the COMEX and LBMA to suppress the price of gold. When gold goes up in price, it will be against the will of the Chinese, the Russians and the Indians.

The BRICs are all IMF member countries and are thus forbidden to monetize gold, or link their currencies to gold, or use gold as a trading or exchange mechanism:

http://m.beforeitsnews.com/silver/2016/04/how-the-imf-forbids-the-use-of...

http://www.24hgold.com/english/news-gold-silver-why-does-the-imf-prohibi...

India recently collaborated with Western bankers and following the West's instructions, temporarily destroyed the purchasing power of its own Indian population by demonetizing physical cash, under the guise of eliminating tax evasion and cash-only criminal activity. This has had the effect of crashing the gold price by temporarily removing the Indians from the gold market, exactly when the Trump inauguration lit a fire under the gold price.

The Russians never abstained from using dollars even at the time of the communist USSR! If they did not demand gold for their oil during the Cold War, why would the Russians do it now when the Russian central bank is owned and controlled by the City of London banking establishment since the creation of the new Russian Constitution under Yeltsin? The Russians are forbidden to issue their own currency the Ruble without permission from Western bankers and the Russians can only buy US Treasuries with the dollars they get for their oil, not gold. There are more dollar assets than Rubles in Russia:

http://anonhq.com/checkmate-central-bank-russia/

http://www.pravdareport.com/russia/economics/30-12-2014/129431-usa_russi...

The gold price would have skyrocketed if the Russians and the Chinese were buying gold hand over fist as alleged. Why do you think that Western bankers would give gold away at or below cost to their purported enemies?

Unless they were not enemies in reality, and just partners playing good cop, bad cop for the purposes of fooling and manipulating their unsuspecting respective populations?

http://www.mygen.com/users/ufo/Mao_was_a_Yale_Man_2.html

Why do the Russians never ask the Americans to leave Syria where the Americans are illegal invaders under international law? Why did the Russians never prevent the Israelis from attacking their allies the Syrians?

The Shanghai Gold Exchange is a fraud designed to legitimize the fraudulent COMEX "discovered" gold price. Goldman Sachs and JPM never could have manipulated the gold and silver prices lower without active Chinese collaboration. That the Shanghai Gold Exchange is a physical only market is a LIE:

https://www.sprottmoney.com/blog/the-new-shanghai-gold-exchange-does-any...

The Chinese government defrauded and stole from their own Chinese citizens by encouraging them to buy gold at the top. The Chinese bankers then colluded with JPM and Goldman Sachs to crash the gold and silver prices. Large amounts of physical silver were leased out and sold into the physical markets by the Chinese authorities as well:

http://www.silver-investor.com/charlessavoie/cs_july04.htm

http://m.digitaljournal.com/article/279166

http://www.dnaindia.com/money/column-china-urges-citizens-to-buy-gold-an...

Do not forget: It's the international ruling classes against the common folk. That's the real meaning of globalism.

Pearson365's picture

The evidence in your links is very interesting however China has been encouraging her citizens to buy gold for many years, not just at the top.  That's because China views citizen gold as easy to confiscate volutarily from her citizens.  And despite the fake SGE derivative market China WAS and IS still accumulating vast amounts of physical gold and that is information in your own links.  The evidence is very clear that China is playing both sides of the game.  On one side playing the IMF bankster game and on the other side stocking up hard assets for the inevitable global monetary crisis.

Maestro Maestro's picture

1. The Chinese government screwed its own people by encouraging them to buy gold at the top (around $1900 in 2010-11) and then colluded with JPM and Goldman Sachs to crash the gold and the silver price. No rational explanation exists for this fact except insanity and sadism. All Chinese government members merit the death penalty for high treason.

2. The Chinese elite, just like the Russian oligarchs including their poodle Putin, are being allowed to buy locally-mined gold only. No gold is coming to China or Russia from Switzerland, England or the US. This is the 800-pound gorilla in the room: the Fed and the Rothschild are using this made-up story of enormous Chinese and Russian purchases of gold to confuse and demoralize goldbugs -- 'how can gold stay low with this level of buying?' they quietly ask themselves. The gold price is contained because there is NO transfer of gold from London to either China or Russia. The western bankers would rather rape, torture and then kill their own mothers before they gave gold away to the Chinese or the Russians. Think: how could gold stay at the same price with thousand-ton purchases of gold per year per country. It's a mathematical impossibility. No banker, human or Martian, will relinquish wealth for ANY reason, money and power being the ultimate goal for them.

Spread the word where you can, thanks.

silverer's picture

"China, like Russia, is not pro-gold and acts in collusion with the COMEX and LBMA to suppress the price of gold."

OR...

China and Russia loves the low gold prices, which are necessary to prop up the fake US dollar. Every day Russia and China "steal" tons more from the west at a bargain basement price and stockpile it. Then, at some point, the US dollar collapses and can't be propped anymore due to COMEX no longer being the only game in town.

Nobodys Home's picture

What would Jesu...I mean China do? I'd prop up the US dollar and milk it for all I had if I were them. ...Bonus low gold price as I pile on my hoard of the golden dragon...
...And you prebes no bitcoin foah you! No offshoring China money or you die rike Saudi eritests!

Maestro Maestro's picture

1. The Chinese government screwed its own people by encouraging them to buy gold at the top (around $1900 in 2010-11) and then colluded with JPM and Goldman Sachs to crash the gold and the silver price. No rational explanation exists for this fact except insanity and sadism. All Chinese government members merit the death penalty for high treason.

2. The Chinese elite, just like the Russian oligarchs including their poodle Putin, are being allowed to buy locally-mined gold only. No gold is coming to China or Russia from Switzerland, England or the US. This is the 800-pound gorilla in the room: the Fed and the Rothschild are using this made-up story of enormous Chinese and Russian purchases of gold to confuse and demoralize goldbugs -- 'how can gold stay low with this level of buying?' they quietly ask themselves. The gold price is contained because there is NO transfer of gold from London to either China or Russia. The western bankers would rather rape, torture and then kill their own mothers before they gave gold away to the Chinese or the Russians. Think: how could gold stay at the same price with thousand-ton purchases of gold per year per country. It's a mathematical impossibility. No banker, human or Martian, will relinquish wealth for ANY reason, money and power being the ultimate goal for them.

Spread the word where you can, thanks.

herbivore's picture

Why wouldn't they want to wait with doing this until they've accumulated as much physical gold as they possibly can at the low prices that are a direct result of the paper gold markets. I would prefer that the physical gold price stay low for at least a few more years. 

Davidduke2000's picture

the move is to cripple the us who has no gold at all, even if it claims to have 8000 tons but cannot prove it.

if the price of physical gold move up and it will like bitcoin, $10000/oz this will make their reserves worth $578 billion based on 1800 tons, this will give Russia a huge reserve.

Nobodys Home's picture

Yah but..On the 4th of July Munchkin and his wife flew down on tax payer dollars to Fort Knox to check it out and party on the roof! The gold's there! Why else would they be partying? Likud'd be somewhere else?....Depends on what the meaning of there is:)

Davidduke2000's picture

it was a stunt because they know what is coming and there is no amount of propaganda that can help . the world is on the verge of collapse and money as we know it would no longer be trusted especially the Japanese Yen, The Euro and the USD, they printed so much hat the true value of the USD is only 20% of where it is now and probably less.

If a company has a million shares float and each share is $100, but then the company issue another 1million shares, the price automatically drops to $50, however the USD as well as the yen and the euro were printed out of existence.

Jack Oliver's picture

AND if they return to the GOLD 'standard' - ratio 10 to 1 - well - they could print fiat worth close to six trillion - entirely backed by gold !

China have already 'lauded' that their gold standard would be 25 to 1 ratio - that a LOT of fiat to sustain their world trade !!

It's on the way !!

hoist the bs flag's picture

but but but but, muh peak oil

emersonreturn's picture

thanks herdee...wondered why rosneft was down friday (besides the usual). ;-)

silverer's picture

COMEX is about to get swept under the rug.

TRM's picture

Yep. That is what will happen when the physical is separated from the paper and the price of the physical goes up past what the paper is. Everyone who has the paper will try to sell to get the higher price and then it is over for the paper.

DennisR's picture

THat's a lot of gold.   I'm sure US intelligence will soon state that Osama Bin Laden and Chemical Weapons have been seen in Russia, China and India.


wattie's picture

Join the Global Class action fightback against gold/silver manipulation!

http://www.leonkaye.co.uk/class-actions/possible-manipulation-gold-silve...

Investors from 18 countries around the world have signed up so far...will you?

Together we can end this.

www.goldclassaction.com

 

www.silverclassaction.com

Silver Savior's picture

Be sure to get all the real precious metals you can get. No fake schitt. Stay away from eBay unless buying from a well known dealer and constitutional silver dimes, quarters and half dollars are a safe bet. Dollar coins you have to really look at them. 

Nobodys Home's picture

Sucks that junk silver (constitutional) can't even be a serious collectible because they melted so much of it in the 80s. Mintages don't even matter anymore. Perhaps million plus mintages are now more rare than those with original mintages in the thousands.
Addendum: Screw Ebay AND Paypal!

Snaffew's picture

just buy some gold and silver scratch and acid and test it with nitric acid for gold and silver, use color plates, bleach for silver, magnetic testing, etc.  There are numerous test kits to buy which will help you correctly identify the authenticity of your pm's.  Always buy from a well reputed dealer---avoid sites like e-bay above all.  Quarters and dimes from 1932 to 1964 are usually around 90 percent silver.  A 1960 quarter is worth about $4 today.

Nobodys Home's picture

From Chupacabra-322: "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."

From me: "They invited us (The U.S.) to join them in these endeavors and we told them to go fvck themselves. A very large miscalculation in my opinion." ...
...Unless it's all by design. After all we all bow down to the IMF and BIS.

Which tells me (and reinforces my thoughts going back a number of years) ..They have had their way with us and are moving east. Everything I've seen or heard for over a decade evidences this.

Davidduke2000's picture

where do you get the shit" they invited the us to join them'? they are running awy from the us and the us dollar

Nobodys Home's picture

They did. When the AiiB was being formed they invited the U.S. to get on board. I don't have a link handy but I'm sure it's out there and easy to find.

edit: Here's a quick link from a fast search:
https://finance.yahoo.com/video/aiib-look-forward-working-us-225500615.html

BTW did you read my entire post? I think I mentioned they are running away from the US dollar...in different words:)

JohninMK's picture

BoE joined in. Much to the anger of the Fed.

Snaffew's picture

It's about time that the US/London/Zurich derivatives based fiat paper gold trading behemoths eat a big ol' shit sandwich and lose complete control of their suppressive pricing tactics.  May the US dollar crash and fucking burn once these parasites are removed from relevance and expelled to obscurity.  Fuck 'em all!

d edwards's picture

Prelude to a gold backed currency?

shizzledizzle's picture

Amazing that the rest of the world sees right through Yellen's bullshit with crystal clarity and Americans haven't caught on. The FED is stealing from EVERYONE that uses the USD and the rest of the world is tired of it... This accelerates the implosion timeline dramatically. 

everything1's picture

I think it is wise for larger nations to get their gold trading system down, be it paper gold with no physical backing it or not, in a currency crisis they'll need something when trust is eroded.  Recessions are world now, and inflation can get bad too.  I theorize that negative real interest rates have made gold in any form, wildly popular.  History might keep repeating itself but keeping your commerce system going somehow is of utmost importance when economic shocks come hither as they always do.  I think we are good for awhile here as it's never been so easy to game the system as it is now.

Son of Captain Nemo's picture

YIPPEE KI-YAY MOTHER FUCK!!!

hoist the bs flag's picture

no worries hedgers! Trump is brokering a back door deal to get all da gold back to duh "merica

BrownCoat's picture

This is great! A little competition in the gold markets. I can't wait to watch The Fed manipulate physical PMs.  ROTFL