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Tuesday, 24 April 2012

Gold metal partially replaces US dollar for international trade

The west's strategy of short selling gold into Chinese hands is "novel" and "courageous".  China's plans to pay gold, and to barter other produce, to purchase Iranian oil follows India's similar intent.  The increasing denomination of international trade in gold and barter produce instead of the US dollar global reserve currency is significant.

In using the international financial transaction system to project political will, and simultaneously devaluing the US dollar with large scale money printing, the US is reducing the international community's desire to denominate international trade in US dollars, further reducing the value of that currency.

To protect trade against western interference, it makes sense for China to seek trade facilities which do not rely upon western international funds transfer systems, such as the SWIFT system, as noted in "Gold's status as reliable currency boosted" in February.  India was to use gold as a currency for trade with Iran, as noted in "India to pay gold instead of US dollars for Iranian oil".

Western central banks sometimes arrange for gold to be sold, driving the price down, to support western currencies, and to control their rate of decline which is accelerated by massive quantitative easing.  Western currencies will continue to lose value over the long term as the value of gold, which can't be printed, increases. 

Forbes' article "The best reason in the world to buy gold", which I acknowledge with thanks, describes how the US National Defense Authorization Act increases the incentive to reduce dependency upon the US dollar, and the possible effects of increased barter trading on gold and silver prices.

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