While the volume of gold added to the international reserves at the Reserve Bank of India (RBI) is not a huge amount, a mere 8.46 tons, the significance, and timing, can not be overlooked.
With the geopolitical landscape, basically, sitting on shifting sands, with trade wars, shooting wars and economic sanctions flying around like another flight leaving O’Hare International Airport it seems that India is making a “good faith” showing to her allies in the BRICS alliance by adding a small amount of gold to their official international reserves. We don’t know that this is the reason for the gold addition but let’s take a look at some of the puzzle pieces.
It is well documented that Russia and Turkey are removing U.S. Treasuries from their holdings and China is discussing Turkey joining the BRICS alliance which is another interesting piece of this puzzle. All of this is against a backdrop of Iran and Turkey settling oil payments outside the U.S. dollar.
Both India and Turkey have said they will defy President Trump’s call for them to stop buying Iranian oil once the U.S. reapplies sanctions in November. That isn’t really news.
Both of them defied the Obama administration in 2012, albeit in different way. Turkey changed its banking rules to monetize gold and used its gold reserves as a means to launder Iranian oil payments for third parties through its banking system.
India bypassed cutting off Iran from the U.S. dollar by beginning a goods-for-oil swap program.
Today, however, the geopolitical background is far different. Today, Iran can and does list its oil for sale in Shanghai’s futures market payable in Chinese Yuan. Turkey can recycle its Yuan it receives from its large trade deficit with China to up its purchases of Iranian oil if need be. Source
This is the exact same scenario that is playing out, today, between India and Iran. Oil is the key factor in this and gold is the unit of account to facilitate the transaction.
One of Iran’s biggest oil buyers said it has enough alternative sources of crude to replace any supplies cut off by U.S. sanctions on the Persian Gulf state — even if shipments stop completely.
Indian Oil Corp. Chairman Sanjiv Singh says Saudi Arabia alone can cover most of the world’s supply shortfall in case Iran’s oil exports dry up. Also, a narrowing spread between Brent crude and Dubai oil gives Indian Oil even more options, the head of the state-run refiner known as IOC said in an interview. Source
Iran is an important ally to India, Russia, China and most of the “heartland”. In my opinion, India will continue conducting trade with Iran in spite of the sanctions, since most all other nations will be ignoring the U.S. sanctions and continue conducting business with Iran regardless of what the U.S. policies. The U.S. dollar does not carry the weight it did even a year ago, much less 10-20 years ago.
The entire landscape is changing and as these nations move closer together, while at the same time moving away from all Western ties, especially the U.S. dollar, making gold a much more necessary form of global trade settlement. India needs more official gold and this is one of the reasons that Moscow and Beijing have agreed to open the BRICS Gold Market to help facilitate the acquisition of gold by the other BRICS members, like India.
BRICS countries are large economies with substantial reserves of gold and an impressive volume of production and consumption of the precious metal, said the official. According to him, the new system may serve as a basis for the further creation of new benchmarks.
The Bank of Russia has already signed a memorandum on developing bilateral gold trade with China. The regulator plans to form a single trade system with the People’s Republic of China in 2018.
Last year (2017), the Bank of Russia and the People’s Bank of China announced plans to create a platform that would unite gold trading by the world’s two biggest gold buying countries. Source
India has now, officially, added a small amount of gold to their international assets at the RBI. Like I said, not a significant amount, but very significant timing.
Will we see more additions of official gold by India? If so, how would the BIS and other members of the Western banking cabal see this move? What, if any, are the implications going forward? What about the gold-loving citizenry of India, how will they see this move?
The Reserve Bank of India (RBI), India’s central bank, has just released its 2018 annual report confirming that during the financial year to end of June 2018, the RBI bought 8.46 tonnes of gold bringing its total gold reserves holdings to 566.23 tonnes.
The last time the RBI bought gold was in November 2009 when the Indian central bank purchased 200 tonnes of gold from the International Monetary Fund (IMF). RBI gold holdings then remained static at 557.77 tonnes from 2009 until the latest purchase.
As the Indian government and central bank perpetually wage a war on gold and try to dissuade the Indian population from buying physical gold, it will be worth watching how the Indian population interprets this latest foray into the gold market by their very own central bank. Source
Where gold is concerned there is usually more than meets the eye. This situation, in my opinion, has more to consider than India simply adding a handful of gold tons to their reserves, especially in light of the all the schemes, tariffs and out right attacks on gold by the RBI over the past several years. It will be interesting to see if it is another 9 years before the RBI acquires more gold.