Putin's Love Affair
As Russia increases it's Gold buying by 123% this year as it continues to hedge against the notion of an unstated "Global Currency Crisis"...
The perfect combination of geopolitical tension, stringent isolation, ruble depreciation & steady economic decline have forced the Federation to take a drastic step into adopting a Gold-standard currency. Albeit, pretty far-fetched, this blog post aims to break down the economic viability of a new Gold-exchange and why it is a possible step for Russia.
A Brief History
The Soviet Union through the 40's and 50's viewed Gold & Silver as strategic metals and for National Security... Anybody holding Gold in a personal capacity would of been put in Jail.
Here is a picture of an Old Soviet Bank Note - reading "Currency backed by Gold, Precious Metals & Assets of State Bank".
Russia aimed then and now to play hard-ball with the West - in protest against being held at mercy of the US Monetary policies - as they present their Gold backing as a Currency-War weapon.
Russia recently overtook China in terms of Gold reserves whilst their economy remains structurally weak. However, with supply threatened Oil prices along with several other falling energy prices & the depreciation of the ruble - A move to Gold will allow the country to be seen as a more efficient, perhaps a more trustworthy trading partner.
Strangling the USA
An official move to Gold would be monumental and China would be more than likely to follow suit.... Huge threats of inflation would immediately flare upon the US Economy.... Ultimately, the Fed's worst nightmare.
A weapon of mass Financial Destruction
Given the growing influences of Russia, China & other Asian states... a large accumulation of Gold indicates a move away from the USD for easier cross-border trade.
What does the near-term have in store for Gold... Could this Russian buying spree come back and bite them in the ass? Will $1200 hold or could we see potential for lower commodity prices as the USD continues its endless bull run & lower Western % demand for metals. However, this does go against Putin's aim - which is based around using the Gold-backed Ruble to pay odd the countries debt.
Another major drawback is that the Ruble is already heavily backed with Oil and it is pretty unlikely that they would back it with 2 commodities.
What will a continuation of this buying spree cause?
Yet continuing to threaten the US currency, Russia's growing stockpile of Gold would be aimed at taking away the US Dollar monopoly over the metal & with the BRICS on their side a realistic defiance against the threat of a US debt backlash could be on the cards.
Are we prepared for this?
If Russia's biggest Oil Tycoon could be reprimanded and sent to Jail... Could Putin too? Is Putin hedging his bets?....
As Gold continues to grip the $1200 handle... The market is waiting patiently for the next FOMC talk in June to decide on the next direction, as rate cuts linger...
Atom8 offers XAUUSD and XAGUSD trading from 10 cents and 2 cents (spread + commission) respectively alongside leading DMA execution... it is a fine offering to check out.
Any questions or feedback would be greatly appreciated. As always, Peace & Love..
Anish
No comments:
Post a Comment