My guess is it will take Russia and China and the other BRICS nations most of 2018 to get all the nuances worked out and the gold trade settlement contracts will not actually come to the table until 2019 or possibly even 2020. We say this in light of what happened with the Shanghai Gold Exchange (SGE) bringing their gold settlement mechanism online back in April 2016. The SGE was supposed to bring this online in October 2015, but was unable to make it happen as they wished to avoid any major mishaps when launching. Anyone that has dealt with the launch of a new computer system or an “upgrade” to a computer system understands there are usually massive problems to begin with, as going from a virtual world to real world can sometimes be quite different than originally anticipated.
We have been reluctantly reporting on the “gold backed oil contract” supposedly coming out of China sometime in the future. We can say with 100% certainty there will be a yuan backed oil contract launched in the very near future, as that has been officially announced and an actual contract exists. The gold backed portion is still a little sketchy at this point as there has been no official announcement, no Chinese official discussing, nor does any contract exist that is tied to the yuan backed oil contract.
What we just learned “First Deputy Chairman of Russia’s Central Bank Sergey Shvetsov said Friday“, Russia and China are discussing a “single (system of) gold trade both within BRICS and at the level of bilateral contacts.”
Is this the reason for the two recent attempts at beating gold down the line? Neither attempt, in my opinion, was very successful except in the very, very short term as both attempts were greeted with equal amount of contracts on the acquiring side of the trade. The gold bugs were waiting to pull the trigger on these smashes and as soon as the gold chart dropped, it reversed, and most of the “losses” were regained within 48 hours or less.
With this announcement hitting the wire on Friday, November 24, it would make sense these recent smashes were the type of attempt to push even more people out of the gold market (and into bitcoin) to keep them away from real, tangible money. This also happens to coincide with the official gold holdings monthly announcement showing Russia, once again, increased her share of physical gold at the Russian Central Bank.
Russia has made it very clear that the Federal Reserve Note is a threat to Russian sovereignty and the Russian economy. Russia has also made it crystal clear that she will be making moves away from the Federal Reserve Note, US dollar.
The Russian news service, TASS, is reporting:
“The traditional (trade) system based in London and partially in Swiss cities is becoming less relevant as new trade hubs are emerging, first of all in India, China and South Africa. We are discussing the possibility to establish a single (system of) gold trade both within BRICS and at the level of bilateral contacts,” he said, adding that this system may serve as a basis for further creation of new benchmarks.
According to Shvetsov, the Bank of Russia has already signed a memorandum on development of bilateral gold trade with Chinese colleagues. The regulator plans to take first steps towards formation of a single trade system with the People’s Republic of China in 2018, he added.
“We assume that trade and clearing links should be established. The point is that gold buyers should decide on the place of purchase,” the official said, adding that trade links would enable market participants to make deals on international exchanges via the central counter-party. Source
It sounds like our 2018 forecast seeing the beginning stages of the run up to $1,700+ are now getting secondary support from an actual gold market using physical gold. Russia and China have been making subtle moves with gold over the past several years, and this announcement seems to be the next step in the evolving gold as money story. We will see gold come back to the table as trade settlement. What form it takes has been one of the remaining questions and now we are seeing that conversation begin to unfold. Got physical?
Check out these other articles by our contributors:
Gary Christenson - Rob From The Middle Class Economics
Rory Hall - As One Economy Implodes Another Economy Explodes
Eric Sprott & Craig Hemke - Weekly Wrap-Up