The US is likely putting additional upward pressure on gold through Iranian sanctions. As we’ve discussed here before, some countries are looking for ways around the sanctions, without overtly transgressing them. By walking this thin line, they can continue trade with the US while still enjoying commerce with Iran at the same time.
India has been put between a rock and a hard place by these sanctions. Already struggling financially, the last thing they need is to harm their relationship with either the US or Iran. In order to avoid the sanctions, India has been trading with other resources, in what is becoming a world barter system. Such a system bypasses the need for central banks, through which the sanctions are monitored. And the use of gold in bartering, becoming more popular, helps increase the metal’s demand.
China has pushed the envelope harder as well, aggressively seeking to trade with Iran through barter, in order to maintain its relationship with the US. And China really seems to be aggressively seeking a world position in the metals’ markets. A few numbers verify clearly that China is serious.
In 2011 China’s gold consumption rose 33% (190 tonnes) to 761 tonnes. Silver rose 6.8%, to 6,088 tonnes. Jewelry purchases increased by 28%, bars 51% and coins 25%.
Another aspect in which China is distancing itself from dollar dependence is through forex agreements. A deal that seems to be all but certain to start by mid-summer would implement a foreign exchange directly between the yen and yuan, avoiding the need to exchange to US dollars first. For both countries this would amount to significant savings in exchange fees alone. With greater ease of exchanging currencies, it is likely that trade relations will improve as well. But it gets better.
The Industrial and Commercial Bank of China (ICBC) is pursuing membership in world bullion markets. While having made its mark on China’s futures market, ICBC has been limited to OTC trading up to this point. By gaining influence in COMEX and LBMA, ICBC will enjoy greater liquidity in the metals market. Customer and supply base will both increase dramatically as well. We’ll have to wait and see how this affects current manipulation efforts on these markets. Will they be a player or a thorn in their side?
Not only is China pursuing means to circumvent US sanctions against Iran by barter and gold transactions, but Iran has proactively sought to divorce its dependence upon the world banking cartel. As SWIFT moved to block all Iranian transactions, in accordance with the sanctions, Iran has implemented a new system for international commerce. This bold move will avoid entangling trading partners in SWIFT’s enforcement of the EU sanctions.
Again we see opportunities for gold to come to the fore. Will it happen? We assume, yes, almost definitely. When? We wish we knew. But we’re ready for it when the time comes.
For your prosperity,
J. Keith Johnson
The Gold Informant