As we reported both here and here, gold is the answer going forward. How we the people will access physical gold or if we will be able to access physical gold is really the only remaining question. How high gold is going is the other important question. I hope it doesn’t get into the lofty heights that have been suggested in recent years - highs like $7,000, $9,000 and even $10,000 an ounce, as it would be much harder for people to use in everyday transactions. Unless, of course, it was on the blockchain or some other yet-to-be-developed type of fintech.
It is also no secret that Russia is looking for the exit door where the Federal Reserve Note (FRN), world reserve currency, US dollar is concerned. Russia has made it very clear they are making all the moves to stop using the FRN/US dollar as their primary currency to settle international trade. Gold will probably handle Russia’s trade settlement just fine.
Russia’s increased purchases of gold is not a red flag, but a clear message of diversification away from the U.S. dollar and its “monetary hegemony,” according to Jeff Christian, the CPM Group managing director.
In October, Russia added another 21 metric tons of gold, which tripled the amount over the last decade and brought the overall total to 1,800 tons.
Russia has added, approximately 18 tons per month, every month, for the past 3 years. At their current pace Russia will move ahead of China into sixth largest gold hoard by late Q1 2018.
But, it’s “business as usual for Russia,” Christian told Kitco News at the Silver & Gold Summit in San Francisco. “[Russia is] finally able to execute on a long-term desire to rebuild their [gold] inventories and to diversify away from the dollar.”
Russia has witnessed most of its gold reserves sold off after the breakup of the Soviet Union, which it has been attempting to regain since about 1997, Christian pointed out.
“In 1997 to 2005 [Russia] didn’t have the foreign exchange and capital inflows needed to convert money to gold. But, as the oil, palladium, and nickel prices started rising in 2005, all of a sudden, Russia’s economy had a massive inflow of U.S. dollars.”
But, the Russian government quickly realized that it had a problem relying on the U.S. currency, said Christian.
“Russia had a massive inflow of U.S. dollars at a time when the U.S. government was increasingly hostile toward the Russian government,” he noted, adding that Russia decided to diversify away from the American currency.
Christian added that Russia is not alone in sending this kind of message of diversification, highlighting that China as well as many other countries are on the same page.
“China in Q1 2009 bought a lot of gold that was supposed to go to China Investment Corp, the sovereign wealth fund. And instead, the government decided to add it to monetary reserves to send a message to the U.S. Treasury that China can in fact diversify monetary reserves,” he said.
Change is in the air, according to Christian: “There is a great dissatisfaction with the monetary hegemony that the U.S. has exercised since WWII and [the world] will move towards some sort of post-Bretton Wood floating exchange rate program at some point in the future.”
You know there is a serious alliance between Russia and China when even Jeffrey Christian can’t discuss one without mentioning the other. These two countries are working hand-in-glove to displace the FRN from its world reserve currency status and move into a system that includes gold at the foundation. Neither country wishes to upset the warmongers in Washington DC as these two countries understand they are dealing with an unstable group who haven’t honored one treaty they have ever signed – not one treaty in all the history of Washington DC has ever been honored. Russia and China are just going about their business of conducting business and when all the major competent pieces are in place it will be too late for the US/Uk to retaliate.
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