The Dollar’s power is based on two things; The perception that the US is the world’s largest superpower, and that it is backed by more than just debt. What would happen if other global superpowers were quietly preparing for a new day? What would be the logical thing to replace the dollar? Real money, gold.
Physical gold withdrawals from the Shanghai Gold Exchange have now reached 13,213 tons since the beginning of 2008, which is on average over 1450 tons of gold per year. This represents where physical gold has moved to the Shanghai Gold Exchange from older more established gold exchanges such as London or Zurich. What makes the Shanghai Gold Exchange unique from other exchanges is two things, one it is a physical exchange, no futures or paper contracts, two, it is a one way journey. The Shanghai Gold Exchange was established for the sole purpose of siphoning physical gold from the west and off the exchange into China. It is illegal to export gold out of China so that gold is never coming back. You are witnessing true wealth move from west to east. The last time gold moved in mass from one area of the world to another was the first half of the 20th century when gold left Europe bound for the US. This also represented wealth moving from area of the world to another.
Shanghai Gold Exchange (SGE) – Gold Withdrawals
Chinese and Indian Gold Demand
The Bank of Russia added a massive 1 million ounces (31.1 tons) of monetary gold to its foreign exchange and gold reserves during January, thereby signalling a strong start to its 2017 gold accumulation strategy. The January increase was on a par with a similar increase of 1 million ounces which the central bank made in November 2016.
The Russian central bank accumulates its gold via purchases from large Russian commercial banks. The Russian Federation, through the Bank of Russia, now holds 1645 tonnes of gold. After adding 200 tons to its gold reserves in 2016, the evolution of Russian monetary gold reserves during 2017 is a key theme to watch.
Russian Gold Reserves
What would happen to the Dollar if the Yuan or the Ruble or both were backed by gold? As they say, “follow the money” or in this case the gold. It appears we are watching a mass exodus of real wealth leave the west and move east. Most notably via the Shanghai Gold Exchange. As China, Russia and the US make economic and military moves on the world stage it is no surprise the last thing Russia and China would want is to be dependant on the Dollar. While the US accumulates debt, the other two superpowers shed themselves of anything tied to US debt and offset this move by accumulating gold.
In the end what do you want to be holding? A paper note (the US Dollar) backed by debt or real money in the form of physical gold? If you are like me you want some of both and I can help you achieve that.