Russian President Vladimir Putin has warned that the brand new Russia-China gold customary spells sure demise of the US greenback throughout the subsequent few years.
Steel consultants have backed up Putin’s claims, predicting that when BRICS nations launch their inside gold buying and selling platform, the worldwide financial system will likely be utterly reshaped, with the West shedding its dominance.
Rt.com experiences: In 2016, 24,338 tons of bodily gold have been traded, which was 43 p.c greater than in 2015, in response to Claudio Grass, of Valuable Steel Advisory Switzerland.
Gold transferring from the West to the East
“We’ve to place the BRICS initiative right into a broader context. It’s simply a part of a geopolitical tectonic shift which began a long time in the past. We’ve seen a relentless outflow of bodily gold from the West to the East. On the similar time, the West has misplaced the financial conflict, and as a consequence, the main focus now turns to the monetary system. China dominates the world financial system and has displaced the US because the world’s most formidable financial powerhouse,” he informed RT.
The creation of a brand new gold customary by BRICS can also be a step to finish the US greenback’s domination of the worldwide financial system
“As Bejing and Moscow perceive that America used the greenback to manage the world, by implementing a brand new form of ‘Gold customary 2.zero’ they wish to distance themselves from this management. Moreover, the overwhelming majority of the individuals in Asia sees gold as superior, or ‘actual’ cash, one thing the West has forgotten, due to all of the paper wealth (credit score) they’ve gathered,” mentioned Grass.
The knowledgeable notes the BRICS nations account for 40 p.c of the world’s inhabitants and round 23 p.c of the world’s home product.
“Together with the announcement of pricing oil in yuan, utilizing a gold-backed futures contract in Shanghai, the institution of the Asian Infrastructure Funding Financial institution and the New Improvement Financial institution, China is organising an alternative choice to the post-Bretton Woods institution. That is actually a sport changer,” mentioned Grass.
Bodily backed treasured metals market spells the top of paper gold commerce
The extent of belief between BRICS nations may also help them set up intragroup gold buying and selling, which might be 100 p.c bodily backed.
“It will current a viable challenger that might over time result in a break up of the present system for the reason that West will seemingly nonetheless commerce paper gold within the meantime,” Grass mentioned.
In line with London gold clearing statistics for 2016, the entire buying and selling quantity within the London Over-the-Counter (OTC) gold market is estimated on the equal of 1.5 million tons of gold. The quantity of 100ouncesgold futures on New York’s COMEX reached 57.5 million contracts throughout 2016 or 179,000 tonnes of gold, the analyst notes.
The quantity of mined gold is way smaller
“If we now think about that solely roughly 180,000 tons of gold have truly been mined as much as as we speak the rip-off is simply gigantic and clearly unsustainable. The paper scams in London and New York will both blow up when the paper worth of gold drops to zero or when only a fraction of buyers insists upon receiving bodily gold in return,” Grass mentioned.
The knowledgeable believes that with paper gold buying and selling, the established gold exchanges might stop to exist ultimately.
“They’ll seemingly change into out of date and lose their significance over time. Though one can not predict precisely how briskly this can occur, the development is obvious: OTC and COMEX are working towards their very own destruction,” he mentioned.
Gold costs might explode if buying and selling have been backed by bodily treasured metals
“It’s going to undoubtedly result in increased costs for bodily gold. Think about in the event you might purchase on COMEX and OTC gold at a a lot cheaper price and nonetheless have the choice to promote it in Asia for a a lot increased worth; this may kill the outdated paper scams instantly. Subsequently, I’d guess that each might give you new restrictions that solely money settlements will likely be allowed to keep away from this. We all know for instance that even as we speak 99.96 p.c of COMEX gold futures are settled in money,” Grass wrote.
The ultimate battle: Gold vs. US greenback
The analyst recollected the Heartland Concept of Halford Mackinder, a British geostrategist in the beginning of the 20th century who influenced the likes of Kissinger and Brzezinski. Following the idea, we are going to quickly face a conflict between bodily gold and the US greenback.
“As per my understanding, we’re transferring into the ultimate part, the battle between currencies – one which will likely be backed by a tough asset which was actual cash since time immemorial till 1971 and the opposite one, backed by guarantees that future generations pays via debt, inflation and ever-rising taxation,” he mentioned.
Getting away from fiat currencies will likely be good for gold
“I wish to conclude with a remaining thought from my pal Jayant Bandari: the mix of unfavorable yields, large political dangers all over the world, and any try to maneuver away from conventional currencies will likely be optimistic for gold and can take it to the subsequent degree. Investing may be very a lot linked with geopolitics – when you perceive the massive image, it turns into obvious what it’s best to spend money on,” Grass informed RT.