🇪🇺 🇲🇨🇨🇭Dan Popescu 🇫🇷🇮🇹🇷🇴

Ignore the noise out there. My whole thesis is that China is trying to build a parallel system to the US Treasuries collateral system, using international physical gold from countries around the world as collateral. This is a huge new use case for gold. Instead of gold sitting idle in sovereign central bank vaults, and instead of sovereigns being forced to swap or sell the gold whenever they need FX liquidity, central banks would be able to access FX liquidity by posting their physical #Gold as HQLA collateral at gold hubs like Hong Kong, Singapore, and potentially London. Even if the gold is rehypothecated several times at the dealer level, the leverage is greatly reduced compared with the 400:1 legacy LBMA paper gold market. Going forward, gold will first have to be repriced higher so there is enough of it to serve as global collateral. It will also have persistent upside because central banks will need to accumulate more gold as collateral as their economies expand over time. #Gold #Silver

Both BJ Milkshake and Bloomberg are missing the point. When China pulled back from processing offshore RMB for Russia, that’s when Russian #Gold exports to Hong Kong exploded. Also: "Crucially, however, Russia and Iran are paid in onshore, non-convertible yuan, meaning that their proceeds are trapped in China. As Dmitry Tulin, a first deputy governor of the Central Bank of Russia, told the Duma in 2023, China does not 'welcome' the circulation of its currency abroad, making it hard for Russia to get yuan 'in cash.”