Tags: Russia | gold | dollar | Putin

The Telegraph: Putin's Gold Binge Is Turning Into a Stink Bomb

By    |   Friday, 14 November 2014 01:10 PM

A defiant Vladimir Putin is taking advantage of lower gold prices to cram the vaults of Russia's central bank with bullion, preparing for the possibility of a long, drawn-out economic war with the West.

The World Gold Council estimates Russia added 55 tons of gold to its coffers in the three months ending in September — far more than any other country, The Telegraph reported.

Russia "is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 metric tons in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the ruble," the British newspaper said.

Because of U.S. and European sanctions over the Ukraine crisis and plummeting oil prices, Russia's currency is under considerable international pressure.

Alistair Hewitt, head of market intelligence at the World Gold Council, said, "Central banks have been consistently adding to their gold holdings since 2009." The council estimated central banks bought 93 metric tons of gold in the third quarter — the 15th consecutive quarter of net purchases.

In the case of Russia, Hewitt laid the motivation for that nation's purchases down to geopolitical risk.

The recent buying has certainly not been a profitable investment for Putin so far — gold prices have fallen approximately 7 percent since October to trade at around $1,167 per ounce. The precious metal is widely expected to post its second straight yearly loss.

Bloomberg View columnist Leonid Bershidsky reported Russia might also be motivated in its gold purchases by a lack of faith in the Federal Reserve's ultra-easy monetary policies.

"Economists who are close to the Kremlin, and far removed from the global academic mainstream, have been telling President Vladimir Putin that the dollar was doomed because the Federal Reserve was printing too much money and that Russia needed to reduce its dependence on the shaky Western financial system," wrote Bershidsky.

Bershidsky said Russia is buying much of its gold from local producers, who once sold it to banks for export.

"The growth of Russia's gold reserves is evidence of both the leadership's paranoia about the West and the country's resilience. Few other nations are able to extract relatively liquid foreign reserves from the ground," he said.

Russia's gold hoarding could be seen as a flight to safety, of sorts, in the light of suspicions Russia was behind a recent intensive cyberattack on JP Morgan Chase, noted Richard Lourie, a columnist for The Moscow Times.

"Moscow's purchase of bullion and the assault on the bank can be seen as tactics of a single strategy designed to break the monopoly of the dollar. Gold is Russia's hedge against that hegemony; it can't be hacked," Lourie wrote in a column for Al Jazeera America.

Earlier this month, Russian legislators introduced a bill to ban the circulation of U.S. dollars in Russia.

"This is yet another attack on U.S. currency. More important, if Russia keeps stockpiling bullion, we could be in for a gold war that might last as long as the Cold War," he predicted.

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A defiant Vladimir Putin is taking advantage of lower gold prices to cram the vaults of Russia's central bank with bullion, preparing for the possibility of a long, drawn-out economic war with the West.
Russia, gold, dollar, Putin
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2014-10-14
Friday, 14 November 2014 01:10 PM
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