The 'G7 of the East'

8.18.23 - The 'G7 of the East'

Gold last traded at $1,888 an ounce. Silver at $22.67 an ounce.

Gold and the 'G7 of the East' - Richard Mills -Ahead of the Herd

The dollar is the most important unit of account for international trade, the main medium of exchange for settling international transactions, and the store of value for central banks.

Lately though, "de-dollarization" is being pursued by countries with agendas at odds with the US, including Russia, China, Saudi Arabia and Iran.

As the target of US economic sanctions (for annexing Crimea, interfering in its election, and invading Ukraine), Russia sees diversification from the dollar and into gold and other currencies, as a way of skirting trade restrictions.

In 2021, China trimmed its holdings of US Treasuries for four straight months, in what analysts called a move to prevent potential adverse impact from escalating China-US tensions.

China actually started to move away from the dollar in 2014, agreeing with Brazil on a $29 billion currency swap to promote the Chinese yuan as a reserve currency. The Chinese and Russian central banks signed an agreement on yuan-rouble swaps to double trade between the two countries. The $150 billion deal is a way for Russia to move away from US dollar-dominated settlements.

A few years ago China came up with a new crude oil futures contract, priced in yuan and convertible into gold. The Shanghai-based contract allows oil exporters like Russia and Iran to dodge US sanctions against them by trading oil in yuan rather than US dollars.