Russia and gold

In a scenario long plotted out by gold bugs, there was another geopolitical shift in the use of the U.S. dollar and gold as financial instruments over the week.

• The Russian and Chinese governments announced they would cease using the greenback and other major foreign currencies to settle their bilateral trade, and would instead use their own currencies.

As a result, the renminbi started trading against the ruble in the Chinese interbank market on Nov. 22, and the two currencies will begin trading in a similar fashion on Russian exchanges in December.

Of course, the renminbi is still hampered as a trading vehicle and candidate for a global reserve currency because it is not fully convertible and is only allowed to trade 0.5% on either side of a daily fixing rate set by the Chinese central bank.

The announcement was made shortly after a visit by Chinese Premier Wen Jiabao to Russian Prime Minister Vladimir Putin in St. Petersburg, where the two signed agreements to cooperate on matters ranging from energy, aviation and railroads, to customs, culture and intellectual property rights. This further links the world’s largest energy producer to the world’s largest energy consumer, with Wen commenting that China will “support the renaissance of Russia as a great power.”

In another move to loosen dependence on the U.S. dollar, Russia’s central bank is adding the Canadian dollar to its international reserves, which rank as the world’s third largest at US$495.7 billion. It’s also looking at adding the Australian dollar to its reserve mix, since the loonie and the Aussie dollar have gained 4.2% and 9.6%, respectively, against the greenback this year as both countries enjoyed strong resource-export revenues.

According to Bloomberg, Russia’s currency reserves are now divided between U.S. dollars (47%), euros (41%), British pounds (10%), yen (2%) and Swiss francs. This compares to 50% U.S. dollar and 40% euro holdings in 2006.

Meanwhile, Russian President Dmitry Medvedev is stepping up the promotion of the ruble as a global reserve currency, particularly in the countries of the former Soviet Union.

With respect to official gold holdings, Russia now ranks as the world’s ninth-largest holder, behind the U.S., Germany, the International Monetary Fund, Italy, France, China, Switzerland and Japan.

According to the World Gold Council, as of September, Russia’s official gold holdings stood at 726 tonnes (23.3 million oz.), representing 5.7% of its international reserves. That’s well up from the 317 tonnes reported at the end of 1993 and the 507 tonnes in 1997. The central bank’s stated goal is to increase its gold reserves, and it has added 137 tonnes just this year.

In contrast, Canada ranks 79th in official gold reserves, behind Tajikistan and Mauritius, but ahead of Slovenia and Aruba. Canada held 459 tonnes (14.8 million oz.) in its reserves in 1990 before the Mulroney-era decision to gradually sell off the country’s gold reserves, leaving 3.4 tonnes (109,313 oz.) in the vault today, representing 0.2% of Canada’s reserves.

• The global warming circus is hitting the road again with another major global gabfest kicking off in the sunny Mexican resort city of Cancun. After shivering through a snowy and useless meeting in Copenhagen last year, delegates have obviously wisened up and have now set themselves up for a full tropical-vacation experience at taxpayers’ expense. (It was a brilliant idea to avoid Sweden this year — the country now looks to be entering its coldest winter in a century.)

We’ll make the bold prediction that nothing will come of this meeting either, except for a deep and heart-felt desire to meet again at another exotic vacation spot next year.

But there have been two hard-news developments of late in the unraveling of the global-warming scam.

In Canada, the Conservative majority in the Senate thankfully killed a climate change bill before it could go to committee — reportedly the fastest deep-sixing of a private member’s bill since 1938. Sponsored by the socialist New Democratic Party, Bill C-311 would have required Canada to cut carbon emissions by 25% from 1990 levels by 2020 and by 80% by 2050.

And in Chicago, in possibly the most under-reported major story of 2010, Al Gore’s once-vaunted Chicago Climate Exchange (CCX) quietly announced it would cease its raison d’tre, carbon-emission trading. The CCX was touted for years in countless mainstream-media articles as the nascent hub of a global carbon trading scheme made mandatory by new cap-and-tax laws imposed on carbon emitters.

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