Russia Conscripts Gold into Defense of The Ruble
The comments below are an edited and abridged synopsis of an article by Chris Powell
Because of Russia’s war against Ukraine, a worldwide currency war is raging, and it is largely a war over gold.
Led by the US, the West is trying to prohibit most commerce with Russia and is specifically targeting Russia’s gold reserves, trying to prevent the use of Russian gold in trade.
This attempt to freeze Russia’s gold is a proclamation by the West that gold remains the most powerful sort of money—money without counterparty risk.
In response, Russia is more or less remonetizing gold officially. The Russian central bank has begun buying gold from Russian mines at a fixed price in rubles, establishing a gold standard within Russia. It is suggesting that gold can be payment for its oil and gas exports.
And the Russian government has removed the value added tax from domestic gold sales to the public to encourage Russians to trade their rubles for domestically mined metal instead of foreign currency.
These moves by Russia have strengthened the ruble after its crash when the West’s sanctions were imposed. Indeed, the ruble finished March as the month’s best-performing currency, only 10% lower against the US dollar compared to where it was on February 24.
The West is trying to prevent gold from becoming international money again, while Russia is striving to restore gold as an international reserve currency, if not the international reserve currency. For now, Russia seems to be buying gold, not selling it, as the West thought Russia would do and sought to prevent it from doing.
Gold is working well for Russia and the ruble.