Today we are going to talk about two topics: One is the G7 countries’ restrictions on Russia’s gold imports. Another issue is about People's Bank of China support for cross-border RMB settlement.
is the RMB settlement order that has made some Internet self-media very popular these days.
The United States and Europe have been very busy these days. First of all, from June 23 to 24, the EU summit will be held. A decision was made during the meeting to grant Ukraine EU candidate country status.
Then came the G7 leaders’ summit. The first two days were held in Germany on the 26th, followed by the NATO summit from June 28th to 30th.
At the G7 summit, the G7 announced a ban on the import of gold from Russia.
This is the result of the United States and its allies increasing sanctions on Russia.
Biden first said on his Twitter account on the 26th that the Group of Seven would ban the import of Russian gold. Biden also said that gold exports bring tens of billions of dollars in revenue to Russia every year, U.S. Secretary of State Blinken said. This measure will cost Russia $19 billion in lost revenue every year.
According to a French official, Europe will follow the decision.
The British government also confirmed the ban on the import of Russian gold on the 26th.
and claims this applies to newly mined and refined gold, but does not include gold that may come from Russia but has already been exported.
Most of the gold exported from Russia is shipped to the exchanges in London, England and Switzerland . These two places are the distribution centers and pricing centers of global gold.
Switzerland has not yet expressed its position.
Why does the United States ban the import of Russian gold?
According to Blinken, gold is Russia’s second-largest export commodity.
Moreover, most of Russia's gold exports are sold to G7 countries. Referring again to Baidu , Biden said, The United States has made Putin pay an unprecedented price. Preventing him from receiving the funds he needs for the war in Ukraine.
But can the gold ban on Russia really cut off Russia’s source of funds?
We followed the energy embargo measures imposed by the United States and Europe on Russia and did not successfully cut off Russia's oil and natural gas exports.
According to the latest monthly oil market report released by the International Energy Agency (IEA), Russia's oil export revenue increased by 50% year-on-year in the first four months of this year.
If the United States and Europe cannot successfully cut off Russia's gold exports, it is once again wishful thinking.
Indeed, London and Switzerland are the main players in global gold trading, but are there no other places in the world where gold can be traded?
There is a gold commodity exchange in Dubai in the United Arab Emirates. is the third largest gold trading center in the world.
There is a gold exchange in Shanghai, China. Now China Aunt Cola has plenty of gold to buy.
The status of Dubai Gold Exchange will be improved, Shanghai Gold Exchange may also gain something. There is indeed some tradition and inertia in the trading of precious metals such as gold.
The gold exchange in Dubai also has a history of more than 100 years. The exchanges in London, Switzerland and New York do not want Russian gold. Naturally, there are other exchanges that can provide opportunities for Russian gold trading.
It seems that the United States may not be able to cut off Russia's participation in precious metals trading. This is the first point.
The second point is that in addition to the traditional trading centers in history, we also need to look at where the consumer market for gold is?
Although a lot of Russia's gold exports are shipped to London and Switzerland, Europeans do not buy that much gold. China and India are the big buyers of gold in the world. are the two countries with the highest gold consumption in the world.
Moreover, since the 2008 financial crisis, the Chinese government has been hoarding gold and wants to increase its gold reserves.
In addition to China and India, there are also Southeast Asian countries, as well as Middle Eastern countries. As long as there are other gold exchanges on this earth, people will naturally buy them.
So the gold ban in the United States and Europe this time, doesn’t it bring Russian gold to the door again?
to China and India, to the gold exchanges in Dubai and Shanghai?
Therefore, for G7’s ban this time, we gave him a term called "saucy operation", which is in vain.
We expect that in addition to Chinese aunts, Indian consumers will also be very happy.
The reason why we use the term Chinese aunt, is because in 2013 and 2014, there was a battle between Chinese aunts and Wall Street hedge funds to do gold.
So what impact will the G7 ban have on the price of gold?
Let’s look at the picture above, which is the spot price trend chart of gold. The price of
yesterday on the 28th dropped by approximately $7.6 compared to last Friday, a decrease of approximately 0.4%. This is a very small decrease.
Generally speaking, the price trends of gold and the US dollar are opposite.
If the US dollar rises, gold may fall. If the US dollar falls, gold may rise, but this is not absolute.
The picture shows the five-day trend chart of US dollar index .
The U.S. Dollar Index rose slightly by 0.5 from Monday to Tuesday yesterday.
So it is difficult to say whether the slight drop in gold spot prices is due to G7's gold ban .
just talked about why the United States wants to ban the import of Russian gold. At this point, we have to mention another possibility.
If the price of gold falls, it will be beneficial to the rise of the US dollar.
The Federal Reserve is now in a interest rate hike cycle.
Since the Federal Reserve has sounded the clarion call to raise interest rates, it has started a wave of global dollar recycling. If the price of gold falls, this will help the Federal Reserve's operations.
First, it can continue to maintain the return of U.S. dollars, which is commonly known as U.S. dollar harvest.
Second, if the U.S. dollar recycling goes smoothly, it will help increase the U.S. dollar’s dominant position in the world. It should be said that under the trend of de-dollarization, the global status of the US dollar can be ensured.
Of course, gold, which has been a hard currency for thousands of years, will no longer be sought after by people if the price trend is weak. This will contribute to the global dominance of the dollar and the euro.
Especially in an environment of high global inflation. The United States and the West absolutely do not want everyone to pursue gold.
Having said that, let’s sort it out again. The main reason we just mentioned is, The United States and Europe want to cut off the source of Russia’s war funding. This statement was said by Biden. Blinken also confirmed this statement.
But the United States is currently struggling with high domestic inflation. The United States cannot be ruled out because it wants to strengthen the status of the US dollar in the world and ensure that there will be no mistakes in the recycling of US dollars.
we have mentioned in the past. This dollar recycling has threefold magic.
The Russo-Ukrainian war quickly increased interest rates, and quickly shrunk . Coupled with the operations of hedge funds, the ban on Russian gold imports this time may also be to ensure that everything can go smoothly.
The reason is, doesn’t a certain major country know that the gold ban on Russia may not be successful? The two reasons
just mentioned are, in addition to London and Switzerland, there are gold exchanges in Dubai and China.
In addition, neither the United States nor Europe is a big buyer of gold. London and Switzerland were merely temporary distribution centers for gold.
In the end, most of them went to other countries, especially in China and India. China and India are absolutely capable of fully absorbing Russia's annual gold production.
If the United States understands this possibility, it will still issue a ban on Russia. It may also have a great purpose of protecting the status of the US dollar and ensuring the smooth return of the US dollar.
As for whether the price of gold will drop sharply due to the ban in the United States and Europe?
I don’t think so.
In an inflationary environment, there is a basic demand for gold. After all, this is the real hard currency since ancient times. For the US dollar, the world's largest currency in circulation, we naturally hope that everyone will use the United States' credit currency and not rely on gold or be superstitious about gold since ancient times.
In the environment of war and inflation, even if Wall Street suppresses the price of gold, even if the purchasing power of consumers in China and India is not enough to support the price of gold, some governments and central banks may also take the opportunity to buy gold, For example, China.
A certain big country wants to suppress Russia and prevent Russia from selling gold, because Russia announced in March that it would buy one gram of gold for 5000 rubles. Russia first locked the ruble into gold.
Then the ruble settlement order for natural gas will be issued.
A certain big country still cannot get rid of Russia’s ruble settlement order.
Yesterday, the price of the ruble shot up again, reaching 53.6, which is equivalent to one dollar. It has already reached the price of 2014, so if it suppresses Russia’s gold, can’t it suppress the ruble?
Of course, this is just one of the calculations, not the whole reason.
I think Europe either does not understand the business of a certain big country, or it does not have the ability to stop a certain big country and can only follow it.
In addition, for Russia, it is not necessary to sell gold. Why?
Gold is the real hard currency since ancient times, or simply put, gold is money.
Russia can keep part of the gold produced in its inventory as a gold reserve, and then print ruble banknotes. Doesn't it mean that 5,000 rubles can buy one gram of gold?
Then print money according to this ratio and this standard.
Again, gold is real hard currency, gold is money, gold is currency.
Russia is the second largest gold producer after China, mining so much gold every year. Keep a part of the inventory, and then issue and print money accordingly.
What can the United States stop Russia?
can't stop it, especially since the price of the ruble is still rising.
Russia does not have a problem with printing money. If the circulation of rubles increases in the future, the worst possible outcome is the Russian central bank selling some gold reserves and then recycling the rubles.
What should Russia be afraid of if it has gold?
Therefore, the operation of the United States and the West is actually putting the cart before the horse and making a mistake. It uses credit currency to suppress gold, suppress real hard currency, and suppress real currency.
Russia has energy, minerals, and food, and China has the productivity of commodities, which cannot be suppressed by the credit currencies of the United States and the West.
We have a data here, In 2021, Russia's gold production was 346 tons, and China's gold production was 328 tons. Russia will surpass China in 2021 and become the world's largest gold producer.
In fact, what we just said is conservative. If Russia is willing to sell all of its annual production of more than 300 tons to China, China can afford it.
In fact, the United States and the West have imposed restrictions on Russian gold exports since the beginning of the Russia-Ukraine war.
Therefore, it does not make much sense for G7 to implement this ban now.
To be honest, the possibility of protecting the U.S. dollar and ensuring the return of the U.S. dollar as we just mentioned is really high.
Of course, there is another possibility, which is to prevent some countries from the idea of hoarding gold in the context of global inflation. Seeing the trend of de-dollarization happening around the world, especially European countries.
So, if a big country strikes out at the right time, which allies dare to disobey, secretly help Russia or secretly hoard gold?
After all, this also falls into the category of protecting the US dollar.
Sometimes I really feel that the methods of great powers may not be clearly visible to countries that are not great powers.
Time is limited. We originally wanted to take this opportunity to talk about the trend of gold consumption in some countries, but we can only do it next time.
Now let’s talk about the RMB settlement order.
A RMB settlement order has been circulating on the Internet this week. Think this is a big killer.
can effectively promote the internationalization of the RMB and de-dollarization.
On January 7, 2022, the official website of the People’s Bank of China released a draft for comments. This is a draft notice on supporting cross-border RMB settlement of new foreign trade formats. Please note that this is an exposure draft. Then on June 16, the People's Bank of China issued another new document with the same title, the People's Bank of China's Notice on Supporting Cross-Border RMB Settlement of New Foreign Trade Business Forms.
just removes the part of the consultation draft and will be implemented from July 21.
When we see this notice, we mean the visible part. There are some possible details that we may not be able to see.
The focus of this notice is. supports new foreign trade formats, that is, it supports cross-border RMB settlement . It should not be said on the Internet that this is a RMB settlement order. Foreign countries who want to purchase Chinese goods must pay in RMB, just like Russia’s ruble settlement. This shouldn't be the case.
One sentence is the key point, The market transaction entities referred to in this notice refer to cross-border e-commerce. Operators of new foreign trade formats such as market procurement trade, overseas warehouses and comprehensive foreign trade service enterprises. Consumers who purchase goods or services.
In addition, this is to support cross-border RMB settlement of new foreign trade formats. does not say that purchasing Chinese goods must be settled in RMB.
The second point is that this notice is targeted at domestic banks and payment institutions.
The first condition that needs to be met is to register in China and obtain an Internet payment business license in accordance with the law.
Of course, we do not deny that this will be helpful to the external circulation of RMB and the expansion of digital payments.
is not just what some online comments say, saying it is an attack order against the US dollar.
What Beijing is doing now, takes advantage of China's advantages in cross-border trade and China's advantages in cross-border e-commerce to support cross-border trade payments .
also facilitates the external circulation of RMB.
Before the RMB is fully freely convertible, RMB settlement orders will not be introduced so quickly, requiring foreign merchants to pay entirely in RMB.
This is not Beijing’s style. Beijing always plays it safe. Some things cannot be rushed and must be done step by step, unless there are some details that we have not seen or cannot see clearly.
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