In Q1, 2013, COMEX gold vaults in the US were drained of 2,000,000 ounces of gold, the largest withdrawal of physical gold bullion in the last 12 years.
In April, 2013 The largest Dutch bank ABN, defaulted on physical gold deliveries to their customers. Clients with allocated gold accounts were informed that all of the physical allocated gold would instead be cash settled.
In May, 2013 the HKMEx, launched just 2 years ago with expectations to establish Hong Kong as a global center for gold futures trading, announced that it had ceased trading services.
Also in May, the 2013 G20 head Russian Finance Ministry, Turkey’s Central Bank and the Reinventing Bretton Woods Committee hosted the Global Finance in Transition conference, where they discussed the execution rules for a peer-to-peer gold-based trade settlement system currently being beta tested.
Last year, in a short 5 month span, Russia and China quietly pulled some 6000 (MT) metric tonnes of physical gold bullion from London banks. So what is going on and what does it mean for Hong Kong?
In 1944, the Bretton Woods system fixed exchange rates of other currencies to the U.S. dollar, which was redeemable for gold by the US at USD$35 per ounce. Nearly 30 years later, on August 15, 1971, President Nixon defaulted on the gold-backing and the $USD morphed into the Petro Dollar, with the US military ensuring the flow of Saudi oil in exchange for transacting in $USD’s.
Monetary scholar Edwin Vieira has observed that every 30 to 40 years the reigning monetary system fails and has to be retooled. He also noted that the average life expectancy for a fiat currency is 27 years, so it should not come as a shock that after some 42 years, the Petro dollar is coming to the end of its de-facto global reserve status.
China’s expanding universe of currency swap agreements are further evidence of growing non $USD settled transactions and recently, the launch of a Chinese Yuan Swap Facility was announced in City of London. In addition, Rosneft the world's largest energy producer and CNPC the world's largest energy consumer, just signed the biggest oil deal in history. The 25 year agreement is valued at USD$270 billion but it will not be transacted in US Dollars.
Brasil, Russia, India and China have created a new trade alliance and a new BRICS Development Bank (BDB) has received a US$100 billion commitment for initially funding infrastructure projects. The BDB has a goal of creating a gold standard central bank with a platform for trading, clearing and settling trades fully backed by physical gold.
Informed observers in China have discreetly acknowledged an existing blueprint for a global currency re-set called the White Dragon Plan. Sovereigns are hoarding above ground gold on their balance sheets and many emerging nations are scrambling to have below ground gold assets included on theirs.
Fiat (paper) gold exchanges are imploding while REAL gold exchanges are setting new records. Russia and China both purchase 100% of their domestic gold mining output and their gold reserves are believed to be multiples higher than the official data. In 2012, China reportedly imported 557MT of physical gold through Hong Kong and in the month of March, 2013 alone the number was 223.5MT.
For over 6000 years, Gold has been the most trusted store of value and the only form of money that has not expired. REAL wealth is migrating east and as physical gold reasserts its importance once again, China and Hong Kong indeed appear to have a golden future.
J. Bradley Hall is the CEO of REALGOLDX™ Global Corp (RGX), a Company clinically focused on Real gold. RGX is preparing to launch a crypto-currency called Gold AURA™ that is backed by physical gold bullion. firstname.lastname@example.org www.realgoldx.com
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Hongkong Business. The author was not remunerated for this article.
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J. Bradley Hall is the CEO of REALGOLDX™ Global Corp (RGX).