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China and Russia Escalate War on US Dollar: Prepare for New BRIC Gold Standard

National Wealth Fund
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There are events taking place that mark the beginning of a contentious shift in the global monetary system.

These events--comprised of maneuvers--aimed at rupturing the economic balance of power as we currently know it--have the potential to plunge the US into a position of severe geopolitical frailty.

The critical element that will define who wins and who loses in this conflict is none other than the yellow metal itself: GOLD.

The scale and structure of the latest gold transactions between China and Russia are signaling the potential formation of a new gold standard--one that would ultimately displace the US Dollar’s status as the world’s reserve currency; strategically centering China and Russia at the helm.

Russia’s largest state-owned bank, Sberbank, announced last week that it had begun trading physical gold, via its Swiss subsidiary, on the Shanghai Gold Exchange. Sberbank, according to Reuters, “plans to expand its presence  on the Chinese precious metals market and anticipates total delivery of 5-6 tonnes of gold to China in the remaining months of 2017.”

Sberbank became an international member of the Shanghai  Gold Exchange last September, completing a pilot transaction of 200 kg sold to local financial institutions. In addition to this move, VTB, Russia’s second-largest bank, also became a member of the Shanghai Gold Exchange.

As we had mentioned in a previous article, Russia and China have been quietly assembling the pieces to escalate its attack on the US Dollar. With everything now in place, it appears they have selected the first of a series of potential targets: starting with the US Petrodollar as a lead into our closest Middle East ally--Saudi Arabia.

A report by the Centre for Research on Globalization explains the implications of these moves:

  • This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold.
  • The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts – basically a barter system or trade.
  • The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil.
  • So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.
  • All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on.

Not only would such a move spell the end of the US Petrodollar, it would also displace the US’s strategic position in the Middle East.

According to an article published by Russian government media, the two countries are working on a much more ambitious plan to promote gold transactions between BRICS nations. As Sergey Shvetsov, head of the Russian Central Bank, stated during his visit to China last year:

"We discussed the question of trade in gold. The BRICS countries are large economies with large gold reserves and impressive volumes of production and purchase of this precious metal. In China, gold is traded in Shanghai, in Russia, Moscow. Our idea is to create a link between these sites in order to intensify trade between our marketplaces."

As a step to advance the establishment of this “link,” Sberbank approached India--a BRICS member--last April to discuss the direct importation of gold.

The message is clear: if the BRICS partners establish a gold marketplace, it can be used to bypass the dollar, undermining the US Dollar as the world’s reserve currency. Russia and China are paving the way for a massive “de-dollarization.”

Their end goal, according to to strategic risk consultant F. William Engdahl, is to “start a snowball exit from the US Dollar, and with it, a sever decline in America’s ability to use the reserve dollar to finance her wars with other people’s money.”

If you are looking for yet another compelling reason to consider buy gold, pay attention to what’s happening between China and Russia. Not only do they recognize its value as a sound means of exchange, they are using as the linchpin against what they consider the “hegemonic” rule of the US Dollar.

It doesn’t take much to realize that the dollar’s hegemony also applies to you as well.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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