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EPS100Momentum (72.34)

Russian citizens should be rushing to Gold.

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March 14, 2014 – Comments (4) | RELATED TICKERS: GLD , GOLD , SQQQ

While the Russian elite are able to hide their money in western markets and avoid any massive declines of the Russian currency that is anticipated with sanctions, the ones not so lucky though can only buy gold to preserve the wealth they have.

"Mr Putin has tried to reduce the elite’s vulnerability to sanctions by warning it to repatriate its money and even passing a law banning the ownership of foreign bank accounts by Russian officials. Yet there is little sign those measures have had any effect, and Mr Putin’s actions are bound to damage the wider Russian economy. They will accelerate capital flight, raise the cost of borrowing and restrict new investment. This could lead to a fall in the value of the currency and in living standards."

According to Geoffrey Pike of Wealth Daily, if the US imposes sanctions on Russia Mr Putin can counter it by announcing that Russia will sell off all of its US government debt. 

Russia’s holdings of about $140 billion in U.S. Treasuries. If Putin and the Russian government do take this action, it could mean a significantly weaker dollar. It would depend if some of the heavier hitters were to follow suit.

Regardless of what happens here, it is likely to be bullish for gold, silver, and maybe oil. This will be even more pronounced if the Russians really do start selling U.S. government debt.

U.S. politicians are trying to act tough and show Putin who's boss. But they are forgetting that the Russians are paying for part of their deficit spending. It may not be much, but it doesn’t take much to start a new trend. In this case, the trend would be getting away from using the dollar as the world’s reserve currency.

 

4 Comments – Post Your Own

#1) On March 14, 2014 at 9:33 PM, awallejr (83.75) wrote:

I wouldn't discount silver coins. You can buy lovely Buffalo/Indian head 1 ounce coins for $23-$24.

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#2) On March 14, 2014 at 10:10 PM, VExplorer (29.92) wrote:

It isn't that common to keep savings invested in gold for Russians. You cannot imagine how regulated internal market of gold where.

Most of Russian's wealth (I mean masses, not elite) are promises of their government for free healthcare and education, early pension, support of parenthood and etc. I'm not sure how US sanctions will affect masses in short time frame.

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#3) On March 15, 2014 at 9:22 AM, EPS100Momentum (72.34) wrote:

Awallejr I picked up shares of GORO because of its location in Mexico which allows it to produce Gold and silver projects that feature low operating costs and produce high returns on capital.

That is not the case for miners in the USA or Europe in which every aspect of the mining process from labor, tools, machinery and taxes are much higher and reduce the profit margins dramatically because the price that gold and silver are sold is the same for everyone.

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#4) On March 16, 2014 at 3:59 PM, EPS100Momentum (72.34) wrote:

Its already March 17th in China and news today in China:

China has surpassed India as the World's biggest consumer of Gold. Chinese consumption jumped 41.4% after gold prices fell and bargain hunters jumped on the lower prices, this is in combination with the run to the safety of Gold by the Chinese as China's economy slows.

It is being reported today that the massive Gold consumption growth in China has now sparked the soon to open Gold Trading Platform in China.  

The Shanghai Gold Exchange is poised to get the jump on other mainland equity and commodity trading bourses by launching a gold trading platform in the city's free-trade zone open to foreign investors.

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