Last week, we explained how economic sanctions on Iran could boost the price of gold as Iranians turn to the yellow metal as a way to skirt restrictions. In a recent article published by the Daily Reckoning, financial expert Jim Rickards put this in a broader context. He described an evolving “axis of gold” as a number of countries, including China, Russia, Turkey and Iran increasingly use physical metal to create an offensive counterweight to the dollar.
This gold-based payments system will dilute and ultimately eliminate the impact of US dollar-based sanctions.”
Late last month, China finally launched its much anticipated yuan-denominated oil futures contract. Many analysts think this is yet another sign that the mighty dollar’s world dominance is coming to an end.
Turkey went on a gold-buying spree in 2017 and that trend continued in the first two months of 2018. Turkish President Recep Tayyip Erdoğan likes gold and it’s pretty clear the president has been pushing Turkey’s central bank to buy gold and reduce foreign currency reserves in an effort to move away from dependence on the dollar and euro.
On April 16, Erdoğan got a little more overt in his apparent quest to dethrone the dollar, suggesting international loans should be made in gold instead of greenbacks in order to prevent exchange rate pressure on economies.
Turkey went on a gold-buying spree in 2017. That trend continued through the first two months of 2018 as the country continues to diversify away from foreign currencies – i.e. the dollar.
Data released by Borsa Istanbul shows Turkey imported 44.47 tons of gold in January and 16.03 tons in February for a total of 60.5 tons over the two-month period.
Russia has passed China to become the world’s fifth-largest gold-holding country.
According to a Bloomberg report, the Bank of Russia added nearly 20 tons of gold to its stash in January, raising its total to 1,857 tons. The People’ Bank of China reported holdings of 1,843 tons.
Russia has bought gold every month since March 2015 in an effort to diversify its foreign currency holdings and minimize its dependence on the US dollar.
Remember the golden rule: He who has the gold makes the rules.”
And the Russians have the gold. Or at least they are in the process of getting it.
Russia’s gold holdings have topped 1,800 tons.
To put that into perspective, between 2000 and 2007, the Russian central bank held just 400 tons of gold. At that point, the country launched an aggressive gold acquisition program. In October of this year alone, the Bank of Russia bought 21.8 tons of gold. At 1,801 tons, the yellow metal now accounts for 17.3% of the country’s reserves. In the second quarter of 2017, Russia accounted for 38% of all gold purchased by central banks. Russia ranks sixth in the world in gold holdings behind the United States, Germany, Italy, France, and China.
Russia’s growing gold hoard is helping to establish economic and political stability and independence for the country.
Turkey is buying gold.
The question is: why?
According to a Bloomberg report, the Turkish central bank added 3.8 million ounces of gold worth almost $5 billion to its reserves this year.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
