US Treasury Confronted on BRICS Trade Settlement News

Late last weekend, the current head of the US Treasury department, Janet Yellen, was asked point blank during her visit in China about potential implications for the upcoming BRICS currency trade settlement system.

Janet Yellen's near 90% fiat US dollar usage in international transactions statistic is misleading as the data is from fiat currency trade pairings. The true figure needs to be divided by 2 as currency pair data adds up to 200% given that there are always two fiat currencies involved.

So the truth is still dominate fiat US dollars but nearer to 43% than the implication that 9 out of 10 fiat transactions involve fiat dollars in international trade, it's currently closer to 4 out of 10.

And that figure is likely to shrink further given a few of the following reasons.

Last month, the US Biden administration confirmed its new Chair of the Council of Economic Advisors, Jared Bernstein, who in 2014 argued to Dethrone 'King Dollar' in a New York Times Op Ed. Stating point blank that we needed higher persistent inflation rates, and that having the world's reserve currency is a privilege the USA can no longer afford. 

Since the 2008 Global Financial Crisis, the BRICS nations have nearly quadrupled their admitted Official Gold Reserves. And last year in 2022, while central banks mostly in emerging markets bought more Official gold bullion reserves than ever recorded in history.

The world's central bank of central banks, the BIS or Bank for International Settlements was publishing white papers and YouTube videos celebrating its successful m-CBDC pilot program involving the central banks of China, Hong Kong, Thailand, and the UAE (the largest hub for Russian gold imports following US led western financial sanctions). This m-CBDC system is perhaps the next iteration of major sovereign trade settlement and by its direct bilateral design, it will likely prove to be long term bearish for fiat US dollar demand when it likely comes to fruition soon enough.

Meanwhile reports from Reuters this week confirm what we have been suggesting is also likely inevitable.

Russian Foreign Minister Sergey Lavrov also spoke this past week on BRICS trade settlement related matters at hand.

The silver and gold derivative markets had positive spot price action this week likely bolstered by a weakening fiat US dollar relative to other major competing fiat currencies.

The spot silver price closed near the $25 oz bid mark while the spot gold price finished just below $1960 oz bid.

The spot gold silver ratio shot downward strongly, finishing at 78.

As we await the likely recession admittance to come, worrying data like this ballooning credit card delinquency chart illustrates that the US consumer driven economy is growing historically weak. Credit card delinquencies at small banks now past their 2008 GFC and 2020 pandemic shutdown highs.

Long term silver chart bulls were out this week conveying the bullish setup for spot silver prices to come using past bull market breakouts as potential proxies. 

And while this rocket ship bullishness might be a bit premature given the threat of recession and further financial crisis on the horizon, Nicky Sheils had a few interesting points on silver's long term technical structure and how it tends to outperform with relative fiat US dollar weakness. 

All this past week, the fiat US dollar DXY index looked terrible and sold off strongly so it was no surprise to spot silver in fiat US dollar terms climbing.

Turning toward eastern silver demand, China's Shanghai Futures Exchange continues to show strong physical silver off take from its mainland warehouses, with nearly 50 metric tonnes departing this week. Just over 1.6 million ounces of silver is just over 16 of these 4 story pallets holding 96 1,000 ounce silver bars much of which is likely heading into rapidly expanding Chinese solar panel infrastructure.

Banks are beginning to more explicitly report the building bullish situation for silver at the moment.

Well given that aggregated eastern world silver price data has now aggregated to nearly $315 oz while western world derivative suppressed spot price is still lagging pathetically 50% below it seemingly ancient nominal record price high of $50 oz. 

My suggestion still stands, for the Eastern and Western silver markets to come back into equilibrium is going to require substantially higher spot prices and by the time that happens those who held silver from here to there will likely be very happy they patiently did so.

That is all for this week's SD Bullion Market Update.

As always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...