Russia’s Massive Gold Sales: What Does This Tell Us of Kremlin Calculations?

In a bad year for the Russian economy (and everyone else’s) – 2020 – with demand for energy resources from the world market significantly reduced by the Wuhan virus to the point where the futures price for oil at one point spectacularly dropped through the floor, one bright spot illuminated the gloom, and that was the sale of gold. Russia sold two and a half times as much gold in 2020 into a rising market as in the preceding year – to a massive total of 320 tons – which brought in four and a half times more income than in 2019: a windfall of 18.5 billion dollars.

So at a time when Janet Yellen at Treasury now twinned with Jerome Powell at the “independent” Federal Reserve are denying the prospect of inflation as they desperately prop up asset prices with the propagation of yet more paper currency like there was no tomorrow, the Russians still seem to believe in the dollar. Perhaps they would be better employed watching Peter Schiff’s podcasts and think again about the value of gold as a stable source of value.

This raises an interesting question as to how the Kremlin evaluates the economic situation we will face well before the end of the decade. Many Western analysts are assuming that the mass production of fiat currency led by the once mighty dollar, and the pump priming of US domestic consumption on an unprecedented scale, the dollar as confetti, will inevitably lead to a severe devaluation in real terms. The current US retail price index is designed not to tell us what is really happening on the inflation front but any fool out shopping knows the rising price of goods in the supermarket and the ever more burdensome cost of services.

In this situation one would expect a major world gold producer to stock up on bullion rather than trade it in because the leverage it will eventually give over a dollar based economy is nothing to sneeze at. If one combines this with the expected rise in all commodity prices – and Russia is after all a major commodity exporter – not least of oil and natural gas, the balance of economic power could shift decisively to Russian advantage, in Europe (look at Germany) as in the United States. As President Biden destroys US prospects for autarchy in energy, the Russians certainly have good reason for hope.

This was the vision that Putin originally placed so much trust in when he came to power at the end of the nineties, during the last great commodity boom, as Russia began to rise on a tide of foreign exchange income and could afford to see the balance of power in the world not in the traditional terms of military throw-weight but rather of expanding economic leverage. Who knows, perhaps he will hang on in the expectation that he was not wrong after all.

Vzglyad ru today:

Главное достижение России может лишиться золота

Весь экспортный успех России нельзя списывать лишь на рост продаж золота4  4 февраля 2021, 23:05 
Фото: Gennadii Khameliyanin/Russian Look/Global Look Press
Текст: Ольга Самофалова