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Russian Economic Power Driving Wedge Between Indebted Western Governments

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Today’s AM fix was USD 1,292.75, EUR 939.91 and GBP 766.67 per ounce.                  

Yesterday’s AM fix was USD 1,292.75, EUR 938.95 and GBP 765.08 per ounce.


Gold climbed $8.00 or 0.62% yesterday to $1,296.70/oz. Silver surged $0.40 or 2.09% to $19.55/oz.



Spot Gold Price in U.S. Dollars, Daily Candle - 2014 YTD (Thomson Reuters)

Gold fell marginally today despite escalating tension in Ukraine and between the U.S., EU and Russia. Dollar gains were cited for the fall.

The government in Kiev has been given a deadline to pay for Russian gas to prevent a supply cut off.

The U.S. is holding a massive nuclear weapons exercise this week from yesterday May 12 to Friday May 16. It is being held in coordination with other combatant commands, services, and appropriate U.S. government agencies, "to deter and detect strategic attacks," days after a similar Russian drill.

Eastern Ukraine states voted in a plebiscite to join Russia but the referendums have been disputed.

Bullion for immediate delivery declined 0.4% to $1,290.44 an ounce, Singapore gold traded at $1,292.03 by 2:40 p.m., according to Bloomberg and their generic pricing. Silver for immediate delivery declined 0.6% to $19.426 an ounce after yesterday’s gain. Platinum lost 0.1% to $1,435.75/oz, while palladium slid 0.1% but remained over $800/oz at $805.61/oz.



Spot Gold Price in U.S. Dollars, Monthly Candle - 8 Years (Thomson Reuters)

The dollar climbed to the highest in a week versus the yen and traded near the strongest in a month against the euro. Data today is forecast to show U.S. retail sales rose for a third month. A worse than expected sales number should see gold make gains and a better than expected number may see gold fall.

Gold has rallied 7.5% this year, partly due to safe haven demand as tensions rise between Russia and the West.

Russian Economic Power Driving Wedge Between Indebted Western Governments
Officials in the U.S. and European Union are having second thoughts about punishing Russia with sanctions targeting entire industries and the Russian economy, opting instead to focus on tightening pressure by targeting more individuals and companies.

Policy makers say they are concerned that broad-brush sanctions on Russia’s energy and financial sectors, the two areas mentioned as possible targets, risk provoking economically costly retaliation by Russia according to Bloomberg.

Gazprom, Russia’s massive gas-export monopoly, yesterday threatened to cut off supplies to Ukraine, a reminder of the power Russia wields over energy supplies to the rest of Europe.


A gas cutoff by Russia would wipe out half of Ukraine’s supply and could severely disrupt supplies to the EU. The EU, Turkey, Norway, Switzerland and the Balkan countries received 30% of the natural gas they burned from Russia last year, according to the U.S. Energy Department.

“We have to be very careful not to hurt ourselves more than we hurt the other side,” Polish Foreign Minister Radoslaw Sikorski said yesterday in a speech in Brussels, echoing comments made by U.S. Treasury Secretary Jacob J. Lew last week.

In a sign of Russia’s ability to use its economic power to drive a wedge between its former G20 allies, France’s government said this week it will deliver Mistral helicopter carrier warships to Russia as planned, thus rejecting requests from its European and U.S. allies to cancel the sale.

There are also significant dependencies on Russian grain exports, particularly in the EU.

It looks the pragmatists and non ideologues may be gaining the upper hand over the  more hawkish western voices who were risking conflict with Russia, potentially militarily.

Russia is powerful both in terms of natural resources and in terms of finances given their very significant foreign exchange reserves. Ukraine is bankrupt and on the verge of hyperinflation as we pointed out here.  Ukraine desperately needs some $20 billion to avoid financial collapse.

With Western nations heavily indebted including the hugely indebted U.S.,  Russia looks like the only realistic source of such funds.

Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Russians use gold as a geopolitical weapon to undermine the dollar.  

7 Key Bullion Storage Must Haves


 

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Wed, 05/14/2014 - 09:18 | 4758441 Duude
Duude's picture

The Azerbaijan-Turkey natural gas pipeline will be completed in 2018. When its finished, it will fulfill most of Europe's natural gas needs. 

Wed, 05/14/2014 - 05:05 | 4758084 Volkodav
Volkodav's picture

Greg Hunter with Paul Craig Roberts:

https://www.youtube.com/watch?v=m1vndEG1Za4

Wed, 05/14/2014 - 08:50 | 4758337 doctor10
doctor10's picture

Putin is merely exploiting Russia's debt to GDP ration of about 8% compared to the near 100% or more of the Western Crony Fascists.  The  'wedge" is a noose of theor own fashion-which Russia has been observing being woven since Krushev's comments from the 1960's

Wed, 05/14/2014 - 05:05 | 4758082 Volkodav
Volkodav's picture

Greg Hunter with Paul Craig Roberts:

https://www.youtube.com/watch?v=m1vndEG1Za4

Wed, 05/14/2014 - 03:32 | 4758035 basho
basho's picture

“We have to be very careful not to hurt ourselves more than we hurt the other side,” Polish Foreign Minister Radoslaw Sikorski - certifiable fool.

polish jokes aren't

Wed, 05/14/2014 - 02:02 | 4757977 daedon
daedon's picture

The Ukraine needs 20B to postpone financial collapse, not avoid it.

Wed, 05/14/2014 - 02:20 | 4757993 Colonel Klink
Colonel Klink's picture

And we're printing nearly a trillion duhlars a year to avoid ours.

Tue, 05/13/2014 - 20:46 | 4757257 Nassim
Nassim's picture

Norway does not import gas from Russia. Norway is a big exporter of gas to the UK, Germany, Denmark and so on. Sweden and Finland are almost wholly dependent on Russian gas.

Tue, 05/13/2014 - 20:11 | 4757141 nah
nah's picture

Russia wins cold war

.

should have won WWII bitchez

Tue, 05/13/2014 - 20:10 | 4757136 Andy Lewis
Andy Lewis's picture

Come on, guy.  You make it sound like the West is being led by retards.  Oh wait....

Wed, 05/14/2014 - 05:11 | 4758088 Volkodav
Volkodav's picture

 .... is led by spoiled sense of self entitlement and not capable of serious thought

Tue, 05/13/2014 - 22:54 | 4756905 AdvancingTime
AdvancingTime's picture

The modern economy that has evolved over the last several decades is loaded with interwoven contracts reeking of contagion. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. This would cause choas in all the markets.

Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/02/contagion-may-lead-to-new-world-c...

Wed, 05/14/2014 - 04:58 | 4758075 Ides of November
Ides of November's picture

Spot on Bruce.

It was most definitely by design - whatever the purpose of that design. Part of the reason that we have been told (which probably has a grain of truth to it even if its not the full story - and far from the full story), is that developing co-dependencies makes it less likely countries will resort to armed conflict.

There is undoubtedly merit in that argument. It certainly allows the country at the heart of this international system (the US) to pick and choose which armed conflicts it gets involved in rather than the other way around. A definite plus for whoever holds the keys to the US military.

Wed, 05/14/2014 - 11:37 | 4759154 Boxed Merlot
Boxed Merlot's picture

...developing co-dependencies makes it less likely countries will resort to armed conflict...A definite plus for whoever holds the keys to the US military...

 

With the US dependent on Russian rockets for satellite placements, can it be any more obvious than to notice the keys are being held off site?

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCgQtwIwAA&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DLBdeCxJmcAo&ei=UIxzU8aDMc62yASy0ICwDg&usg=AFQjCNH8kqw50DL4yZMGyXcp4PkHquDGaQ&bvm=bv.66699033,d.aWw

 

jmo.

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