Russia has quietly made the case for owning gold.
The head of the Russian Parliament, Pavel Zavalny, made comments recently addressing the subject of economic and financial sanctions. It’s clear that gold is playing a large role in protecting Russian wealth. That role may get bigger and it could create a paradigm shift in how the world does business.
We got the February CPI data yesterday. There is some bad news in the report and then there is some really bad news. In this episode, SchiffGold Friday Gold Wrap Host Mike Maharrey breaks it all down. He also talks about gold’s rollercoaster ride this week in the context of inflation and the Russia-Ukraine situation.
As economic sanctions began to put a stranglehold on the Russian economy, long lines formed at banks and ATMs as everyday people tried to pull cash from their bank accounts. A Russian economy expert from the Foreign Policy Research Institute called it “a full-fledged bank run.”
The Russian invasion of Ukraine has completely changed the market dynamics. In his podcast, Peter talked about the impact the situation is having on the markets and the global economy. He also looked ahead, saying Russia can now serve as a convenient excuse for the Fed to back off its planned monetary tightening. Of course, that will have consequences of its own.
President Joe Biden has announced the first round of economic sanctions on Russia as tensions in Ukraine continue to mount. The sanctions came in response to an announcement by Russian President Vladimir Putin recognizing two breakaway republics in Ukraine and his decision to send troops into those regions.
Sanctions are meant to punish Russia, but in his podcast, Peter Schiff explained how these economic moves could also impact the US dollar and create even more inflation.
Russians have gone on a gold-buying spree.
According to Russian media reports, investors in the country have bought a record amount of gold since 2014 despite prohibitively high taxes.
While the Federal Reserve continues to downplay inflation in the US, insisting that it is “transitory,” the Bank of Russia has gone to war with rising prices. Bank of Russia Governor Elvira Nabiullina says she sees “persistent factors” to inflation, and on Friday, the Russian Central bank hiked interest rates by 100 basis points to 6.5%.
In a statement, the Bank of Russia said, “The contribution of persistent factors to inflation increased due to faster growth of demand compared to output expansion capacity.”
Last week, Russia announced plans to completely eliminate dollars and dollar-denominated assets from its sovereign wealth fund. Is this another sign of erosion of dollar dominance?
The news from Russia dovetails with a warning by billionaire fund manager Stanley Druckenmiller that the dollar could cease to be the world’s reserve currency within the next 15 years.
Last week, we reported that the Russian National Wealth fund was dumping dollars and turning toward gold. The Russians have engaged in an intentional de-dollarization policy for several years. But it appears this could be part of a broader global move away from the greenback.
The dollar’s share of global currency reserves dropped significantly in the fourth quarter of 2020, falling to its lowest level in 25 years according to recently released IMF data. Globally, the dollar now makes up just 54% of global currency reserves. The last time the greenback’s share was this low was in 1995.