Russia, China, India Unveil New Gold Trading Network

Submitted by Ronan Manly,

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.


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 website under the same title "Russia, China and BRICS: A New Gold Trading Network".


besnook Five Star Sat, 12/02/2017 - 13:00 Permalink

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.

In reply to by Five Star

MonetaryApostate ParticularlySt… Sat, 12/02/2017 - 22:59 Permalink

 Russia & India & China could Rick Roll the world soon, indeed I believe the Communism we see becoming pervasive everywhere is relevant to their rise in economic & military power.Also, I'm thinking BitCoin is an acronymn for...Bank of International Transactions, hence the currency basket talk by the IMF, & you know the wealthy control everything digital, for certain.The only real hope we have is to wake up the serfs globally, before it's too late, & if you are smart, you'll gtfo of Europe ASAP, especially Britain. islamic invasion is the great war coming & it will pull most of the world into this epic battle where the money printers are watching all of us serfs dying in HD, toasting each other in their fallout shelters in mountains.

In reply to by ParticularlySt…

Son of Captain Nemo MonetaryApostate Sun, 12/03/2017 - 11:02 Permalink

"The islamic invasion is the great war coming & it will pull most of the world into this epic battle where the money printers are watching all of us serfs dying in HD, toasting each other in their fallout shelters in mountains."

Terrorism fermented, funded and managed in Western Europe under an umbrella of multiculturalism ( in order to make events like this ( happen so that when they happen it will gin up support to fight their wars so that they can stay as occupiers in Africa and Libya!

AS you're nothing but a fucking Zio-troll!


Keep pluggin that "Buttcoin"... Because it's the last foot of rope that the Chinese and Russians are only too eager to watch the U.S. hang itself with!

In reply to by MonetaryApostate

Yog Soggoth GlassHouse101 Sat, 12/02/2017 - 17:32 Permalink

I told a group of friends all about this over a year ago and they were looking at me with much skepticism, and asking the usual questions, except for one man who I had only just met at the table. He immediately brought out a pencil and paper and started taking footnotes on the entire 45 minute conversation. I think that man is going to be just fine in his retirement.  I was one of the few who predicted the 2007 housing bubble before I knew the terminology, but what do I know?

In reply to by GlassHouse101

MEFOBILLS besnook Sun, 12/03/2017 - 16:00 Permalink

so much chinese money buying real estate and other usa assets. Trade deficit means accumulation of Dollars held in China.  These dollars then recycle to buy real estate and other U.S. assets, rather than buying goods from U.S. mainstreet.Since much of the world is a dollar zone, including Africa, then recycled dollars from China can be used to buy up resources in those regions.China is a mercantile country with a trade policy of exporting goods to acquire dollars.  The finance sector, which runs the U.S., wants the world's goods priced in dollars, and especially oil priced in dollars.  The finance sector is "international" and their money type is Federal Reserve Notes, a corporate type of money based on debt.  Banking corporations are now tied together in western world through currency swaps, and coordinated market interventions, including even co-ordinated quantitative easings.Keynes Bancor system would stop the shit show.  All international trade is only barter, so an accounting device like the Bancor would not allow China to be mercantile.  Also, Wall Street would have been disallowed from green mailing and other sneaky tricks to export Jobs, to then get wage arbitrage.The trading gold system from bretton woods up until 1971 was similar to the bancor, in that if trade became unbalanced, it was consumated with gold flows.  These gold flows would then trigger an exchange rate adjustment.Russia has been accumulating gold so their central bank can issue Rubles.  The Russian central bank still operates under BIS rules, so Ruble emission is closely related to FX... especially dollars held as FX.   The atlantacists still hold sway in Russia, and for some reason Putin has not dealt with this problem.  In future, the trading currency between nations will not be a bancor (although it should be) but instead will be a basket of currencies, with gold in the basket as well.  Probably other commodities may also enter the basket.  China has pushed SDR to be like this as well, so there is convergence.  The Multi Polar world is being willed into existence by China and Russia.    

In reply to by besnook

earleflorida Five Star Sat, 12/02/2017 - 23:43 Permalink

yeah, but china is australia's largest exporting country with mutual zero tarriff agreement, and the gold in australia is huge!South africa is also loaded with undescovered deposits! (BRICS).i'm sure the french will offer up their unknown quantities to get a peace of the trade!this to could come into play?   'The 1900 Gold Act' and the 'Gold Reserve Act of 1934' (with no known sponsor of the legislation?)

In reply to by Five Star

Anteater Sat, 12/02/2017 - 12:42 Permalink

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 moretungsten blanks. India will repatriate the faux gold coins into the USAthrough their sleeper network of 1,000,000s of H-1B Hindus, and tradethem with Bank of London to obtain pound sterling credits to continueprivatization of the best India industries and prime farmland. FromBank 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!!

83_vf_1100_c Anteater Sat, 12/02/2017 - 13:20 Permalink

  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.

In reply to by Anteater

CHX13 Sat, 12/02/2017 - 12:43 Permalink

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...

DaNuts Sat, 12/02/2017 - 12:45 Permalink

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.

earleflorida Winston Churchill Sun, 12/03/2017 - 12:18 Permalink

pre-wwi russia held eurasia's largest amount of 'gold reserves'...the Tsar Nicholas II secretly transferred russian gold to finland/ sweden to melt down and re-coin for transfer to the french seine 'gold' vaults...Note: this is why Tsar Nichola II and his family were denied exile status by the King of Enland, whom btw was his first cousin and exact look alike because of the secret gold transfer to france!that 'gold' was repatriated again secretly by stalin into the soviet/bolshevik (the french could never be trusted when it comes to GOLd!   * note2: the french were fucked by the bitsh in the 'sykes-picot agreement'the british tried their best to get russian gold backing the 'whites' which failed miserablythink... years later post wwii when churchill's england wanted to invade the soviet union being vulnerable after the devastation of all of russia--- it wasn't about freeing the world of social/communism for freedoms sake--- no, it was about getting russia's gold reserves--- britain was broke!

In reply to by Winston Churchill

earleflorida JohninMK Sun, 12/03/2017 - 19:07 Permalink

'operation unthinkable'churchill wanted anti-italian fascist freedom fighters, russians opposed to communism (whites) that stalin would kill and german prisoners of war captured by the russias etal, to join forces against stalin's ussr.the logistics weren't there but the forces wereFDR wasn't on-board because of the atomic bomb ending all aggression, but churchill smelled blood.he could have gotten away with it, but (FDR now dead) Truman and america were done with World Wars for the tyme being?!?quick ref:

In reply to by JohninMK

Steroid Madolf Sanders… Sat, 12/02/2017 - 13:04 Permalink

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.

In reply to by Madolf Sanders…