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Russia Accelerates its De-Dollarization Process, Adds Gold Bullion - Nathan McDonald (23/05/2019)

Stack of gold bars in front of a Russian flag.

May 23, 2019

Poland, Hungary, China, India, Turkey, Russia, and many others have been active buyers in the physical gold market over the last year, and it appears that at least one, Russia, has no plans of slowing down.

Russia has been very open about the fact that they wish to continue with what they are calling their "de-dollarization" process, shedding their U.S. dollar reserves and moving it into other assets, with the most notable being gold bullion.

This is a trend that has been accelerating for years, kicking off in earnest after sanctions began to heavily rain down upon Russia after the annexation of Crimea from Ukraine in 2014.

The United States in particular has had a heavy hand in its dealings with Russia, as they believed the annexation to be in direct conflict with Western interest.

Since 2014, financial warfare has been raging both behind the scenes and out in the open.

A quick look through a timeline compiled by Radio Free Europe highlights the many actions that have been taken over the last five years. It shows just how serious the West is in its goal of punishing Russia.

The effects have caused severe damage to the Russian economy. However, as they have so many times throughout history, the Russian people have pushed on, adapted, and are now surviving in their new geopolitical world.

The actions taken by the West and the constant beating of the war drum has not come without consequences, however, as Russia has been forced to find alternative trade partners for their plentiful natural resources.

China, another country that is currently the target of scorn from the U.S. administration, has been forced closer and closer with Russia, finding an ally in both of their times of need.

It therefore comes as no surprise that they, too, are happily buying any and all natural resources they can get their hands on, stockpiling and preparing for not-so-sunny days.

This includes opening and buying mines around the world, anywhere and everywhere that they can.

The threat of increased pressure and uncertainty is all the more reason for these two countries to continue in their accumulation of precious metals.

Russia is currently buying all domestically mined gold production, thus taking a huge amount of physical gold off of the market and making them the fifth-largest holder of gold bullion reserves in the world.

This ranking is one that I and many others believe will soon be a thing of the past, especially if they continue shedding U.S. Dollars at the rate they are and moving these funds into gold bullion—which as they have stated, they intend to do.

Russia has already quadrupled its bullion reserves over the past decade, adding a staggering one million ounces in February of this year alone!

First Deputy Governor Ksenia Yudayeva of the Bank of Russia had the following to say about their shedding of U.S. dollars and addition of gold bullion:

“We have tried to bring this (reserves) structure into accordance with the risks we believe we may face.... This is why we significantly lowered the share of the dollar.”

Clearly Russia feels politically, economically, and physically threatened, and they are trying to mitigate their risks and retaliate in anyway possible.

Unfortunately for the West, the true ramification of this entire process is the fact that physical gold bullion is draining out of the open market at a rapid rate, and they are creating a new golden powerhouse within the world.

But why are Russia, China, and so many other countries fleeing the U.S. dollar and moving to a safe-haven asset such as gold bullion?

I believe it is because they can see the long term writing on the wall: they can see that change is coming, they are making their plans for the future, and they are setting themselves up for what they believe to be success.

Ultimately, I believe they hope to dethrone the U.S. dollar as the reserve currency of the world and replace it with one of their own, with gold bullion playing a major role in that process.

Always remember the golden rule: "He who has the gold makes the rules".

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About the Author

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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