Sanctions Drive Russia into Gold's Embrace?
By Staff News & Analysis - November 18, 2014

Putin Is Hoarding Gold To Prepare For Economic War … Russia's central bank added to its reserves of bullion in the third quarter, according to the latest report from the World Gold Council. Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West. The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tons of the precious metal – far more than any other nation – in the three months to the end of September as prices began to weaken. – Business Insider

Dominant Social Theme: Gold, the barbaric metal – who wants it?

Free-Market Analysis: Here's irony … The West is driving Russia into the arms of the much despised (by bankers anyway) yellow metal. Vladimir Putin realizes the ruble is under attack and apparently his plan is to bolster it with gold.

Which begs the question: Did the US and EU officials understand that Russia would buy gold as sanctions begin to bite? Because it seems as if the sanctions are doing just that. Here's more:

Vladimir Putin's government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the ruble.

Russia's currency has come under intense pressure since US and European sanctions and falling oil prices started to hurt the economy. Revenues from the sale of oil and gas account for about 45pc of the Russian government's budget receipts.

The biggest buyers of gold after Russia are other countries from the Commonwealth of Independent States, led by Kazakhstan and Azerbaijan.

In total, central banks around the world bought 93 tonnes of the precious metal in the third quarter, marking it the 15th consecutive quarter of net purchases. In its report, the World Gold Council said this was down to a combination of geopolitical tensions and attempts by countries to diversify their reserves away from the US dollar.

By the end of the year, central banks will have acquired up to 500 tonnes of gold during the latest buying spell, according to Alistair Hewitt, head of market intelligence at the World Gold Council.

"Central banks have been consistently adding to their gold holdings since 2009," Mr Hewitt told the Telegraph. In the case of Russia, Mr Hewitt said that the recent increases in its gold holdings could be a sign of greater geopolitical risk that has arisen since it seized Crimea sparking a dispute with Ukraine and the West.

We've been reporting on the saga of rising dollar prices against gold for months. Seems as if central bank buying doesn't have much of an impact on gold prices, certainly not in the short term.

The article also mentions a rebound in gold demand in India. "Demand for jewellery in the world's most populous democracy grew by 60pc year-on-year to 183 tonnes in the third quarter."

Yet as the article informs us, gold prices have fallen about seven percent since October and the yellow metal should possibly make another yearly loss.

This despite reports in such alternative media as ZeroHedge that physical gold is emphatically in short supply. This observation can be made based on the surrender of German banking officials regarding repatriation of gold from the US.

Here, from ZeroHedge:

[I]t wasn't transportation, or "good delivery standards" concerns, or anything remotely related to Germany "deciding its gold is safe in American hands", but just the opposite: Germany was pressured to keep its gold in the US after a "diplomatic" line of communication was opened, most likely the result of the Fed making it all too clear to the Bundesbank not only who runs the show, but what the assured failure to repatriate Germany's gold would mean for "price stability."

Which has, for now at least, ended Germany's gold repatriation demands.

Now the question is, just how will the US pressure the Swiss "diplomatically" to make sure its own gold repatriation referendum does not succeed. Because if Germany failed miserably to obtain 674 tons of gold in 2013, it is assured that Switzerland will find absolutely nothing in its quest to obtain more than double, or 1,500 tons, of gold as a successful November 30 referendum outcome would require.

This last is a good point. Not only are central banks buying gold, not only is demand in India ratcheting up, not only is Russia adding to its gold stocks while Germany cannot – but the Swiss are voting on gold-backing for the franc. Gold seems in fairly good odor, despite continual attempts to marginalize it.

In fact, we are suspicious of such memes anyway, recalling the dialectic that always seems to be at work.

We think, for instance, based on available reports including statements from the BRICs, that there is (in addition to a dollar "Amen" corner) a continued movement to debase the dollar in order to set the stage for a more globalized currency.

Ironically or not, US sanctions against Russia are now encouraging a trend that undercuts the dollar in favor of physical gold. This may be coincidental, of course, but the globalist trail to a neo-bancor may be a complex one.

Certainly it should be stated for the record that one of the results of these sanctions would seem to be a continued weakening of dollar-clout in Russia and China as well. The end result in decades, or perhaps years, could be the emergence of some sort of broad currency backed by a basket of currencies that may include gold.

After Thoughts

Current US/EU sanctions are encouraging this trend. Coincidence or not … you decide.

Posted in Gold & Silver, STAFF NEWS & ANALYSIS