RUSSIA, CHINA, TURKEY ACQUIRE GOLD WHILE DEPOSITS AT NY FED CONTINUE TO BE REPATRIATED
The golden noose?
The build-up of gold reserves by non-Western countries is something which could end up tipping the scales of the global order.
Many believe that should bad relations continue between the US and these nations then US-denominated assets currently held in forex holdings by the relevant central banks, could be dumped for alternatives. Nations may opt to diversify into the Chinese yuan (in the case of Russia) but also gold. Most likely it would just take either Russia or China to do this, before many others followed suit.
We know from recent comments by the likes of Erdogan and Putin that this is a possibility not far from their minds:
“With the dollar the world is always under exchange rate pressure. We should save states and nations from this exchange rate pressure. Gold has never been a tool of oppression throughout history.” Turkish PM Erdogan, April 2018
At the same conference Erdogan explained how he was pushing for international loans to no longer be made in dollars, but instead gold:
“I made a suggestion at a G20 meeting. I asked: Why do we make all loans in dollars? Let’s use another currency. I suggest that the loans should be made based on gold.”
When loans are made in dollars, the debtor is instantly taken hostage by the issuing central banks' policies. The central bank determines the price of dollar through monetary policy and it's value thanks to currency printing. Were loans to be issued in gold these huge counter party pressures would no longer be a feature of the largely dollar based debt-system.
Hands off our gold
China for many years has made it clear that gold purchased in China is to stay in China. Russia and Turkey are of the same belief.
The news broke last month that Erdogan's central bank had decided to call back its gold reserves held in the United States. There were reportedly 220 tonnes stored in the country. The move was followed by the country's largest private banks also moving their gold from the country. One example was Halk Bankasi bank which transferred 29 tons of gold back to Turkey
The decision followed Erdogan's call to "to get rid of exchange rate's pressure and to use gold against the dollar."
Speaking to RT about Turkey’s decision to repatriate its gold from the US Federal Reserve, Anatoly Aksakov (chairman of the State Duma Committee on Financial Markets) said: "We do not have a gold reserve in the US, we have only Forex (foreign exchange) reserves abroad. No one can lay hands on our gold."
By removing gold from one jurisdiction to another you are making one very loud and political statement - we can look after our gold and we don't want you anywhere near it.
Decisions by both western and non western countries to repatriate their gold tells the US that they will no longer have power over their foreign reserves and that they do not trust them to look after them.
Conclusion - Be your own central bank and take delivery or own in safest vaults, in safest jurisdictions in the world
Russia and increasingly Turkey and China are countries that are increasingly seen as threats to the West, in one form or another. As a result various measures have been taken against them to make international trade and negotiations very difficult.
Whether through sanctions or trade tariffs countries are beginning to really feel the weight of the US and its allies' powers. As a result, they are using gold to protect themselves and to protect their foreign exchange reserves and hard earned national savings.
Investors can learn something here. Fiat currencies will always have a counterparty that is far more powerful than the saver or pension holder. There is rarely little interest by the fiat issuer to take note of how it's currency management is affecting the individual's savings and investments.
Gold removes this risk. Central banks are unable to impact the supply or holding of physical gold that an investor holds legal title to and stores in a safe jurisdiction.
The likes of Russia, Turkey and China recognise the financial independence holding gold bullion can bring, they also understand the importance of storing it at a location that cannot be compromised by western sanctions, central bank screw-ups, political targeting and nationalisation of gold assets and gold companies.
Investors should follow suit and act as their own central bank. Prepare financially by having a sensible allocation to physical gold so that it is protected from central banks massive monetary experiment that risks destroying all hard earned wealth.
Gold also serves to protect in times of heightened geopolitical risk, terrorism and war. Follow the same steps as these aforementioned countries - own physical gold, store in a safe jurisdiction and ensure you have legal title to your bullion through allocated and segregated bullion ownership.
