The “Axis of Gold” Just Got Stronger

The comments below are an edited and abridged synopsis of an article by James Rickards

President Trump has backed out of the nuclear deal with Iran and is re-imposing harsh sanctions. He has also canceled the nuclear summit with North Korea, so we can expect the Axis of Gold (Russia, China, Iran, Turkey and possibly North Korea) to get even stronger. It has potential to accelerate the demise of the dollar-based international system.

These countries are forming a trading and financial network revolving around gold and are acquiring massive amounts of physical gold to support it. They are steadily moving toward a gold-based balance of payment system. Why is this happening?

If you’re on the receiving end of American sanctions like Russia, Iran or North Korea, you want a way to work around these sanctions, and gold is a powerful alternative.

Gold allows the parties to settle the multiple monetary transactions involved in this triangle trade.

The parties can tabulate who owes what to whom, net it out and settle the transactions in gold. This is basically how a clearinghouse works.

When it’s all added up, for example, if it turns out that China owes Iran, China can then ship gold to Iran to square the account.

These partners have a working payment system to settle trade. They’re not using the dollar payment system, or the SWIFT payment system, or anything that the US can interdict or even trace. They’re in effect bypassing US sanctions by using physical gold.

This creates additional demand for gold as these nations acquire gold to preserve wealth and to mitigate their overdependence on the United States.

But now they’re actually getting to the stage where a nondollar system is close to becoming a reality.