by Jim Rickards, Daily Reckoning:
A major blind spot in U.S. strategic economic doctrine is the increasing use of physical gold by China, Russia, Iran, Turkey and others both to avoid the impact of U.S. sanctions and create an offensive counterweight to U.S. dominance of dollar payment systems.
This is the Axis of Gold.
This gold-based payments system will dilute and ultimately eliminate the impact of U.S. dollar-based sanctions.
Gold offers adversaries significant defenses against these dollar-based sanctions. Gold is physical, not digital, so it cannot be hacked or frozen. Gold is easy to transport by air to settle balance of payments or other transactions between nations.
Gold flows cannot be interdicted at SWIFT, the international payment system. Gold is fungible and non-traceable (it is an element, atomic number 79), so its origin cannot be ascertained.
We have a lot of data to support the claim that the Axis of Gold exists and is gaining strength.
We know that for example, Russia has tripled its gold reserves in the last ten years. It’s gone from about 600 tons to over 1800 tons of physical gold, and is moving very quickly towards 2,000 tons. That’s an enormous amount of gold.
China is also amassing physical gold at an astounding rate. Like Russia, it has tripled its gold reserves, officially from 1,600 tons to 1,800 tons.
But we have very good reason to believe China actually has a lot more gold than that.
China might actually own up to 4,000 tons of physical gold. We don’t know the exact number because China is highly secretive about its gold acquisitions. But that’s a reasonable estimate. China is also the world’s largest gold producer with mining output of about 450 tons per year.
Iran also has an enormous amount of gold. Iran received billions of dollars in gold from the Obama administration as bribes to join in the now discredited nuclear deal (the “JCPOA” or Joint Comprehensive Plan of Action) to limit Iran’s nuclear weapons program.
Iran has also received gold imported from Europe via Turkey, but the exact amount is unknown.
We don’t have any insight into how much it has because it’s also highly nontransparent. But in the first quarter of 2018, Iranian gold bar and coin purchases more than tripled.
Turkey is also acquiring enormous amounts of gold, which should not be surprising given Turkish president Recep Erdogan’s recent comments questioning the role of the dollar in global trade.
The Turkish central bank has almost doubled its gold holdings since last May, according to the World Gold Council. And it was the second largest buyer of gold among central banks for the first quarter of 2018.
So that’s the Axis of Gold. Again, evidence for this Axis of Gold is overwhelming.
I have contacts in the national security industry community who have, in their own roundabout way, been able to confirm that to me, so it’s very clear that’s what’s happening.
This is the type of information you don’t see in the headlines. This is very granular, but it’s all going on behind the scenes.
I’ve explored the implications in many financial war games and other meetings as I’ve described in my books.
I’m also on the Board of Advisors of the Center for Sanctions and Illicit Finance, which is the leading think tank on this subject. I meet with others who are expert in this area, including current and former government officials.
I’ve warned the Pentagon and the Treasury Department about this threat for years. But the message has yet to sink in. The U.S. is still unprepared for this coming strategic alternative to dollar dominance.