Coming back to gold, Russia has been purchasing gold strongly in recent months. It purchased some 18.6 tonnes in June alone. It looks to be preparing itself for a period of financial attacks and sees gold as the best insurance against this. The West tends to see the effect of ever increasing sanctions on Russia as having the same kind of impact they would if they were applied to a Western nation, but this is not necessarily the case. The Russians have a history of surviving serious financial hardships and anything the West throws at it in terms of sanctions just won’t anywhere near compare to those hardships still in recent memory – particularly when it has allies like China and most of the CIS states to help it out in trade terms.
If the West escalates sanctions further, at some stage Russia’s President Putin will undoubtedly come up with serious retaliation. He has a strong-man image to live up to domestically and a desire for Russia to consolidate its place as one of the global superpowers. From the Russian viewpoint it has given in too much to the West in recent years. As we mentioned in a previous article, Ukraine is, in effect, Russia’s Cuba. The point at which the bear cannot afford to be faced down and is likely to resist strongly either covertly, as it seems to be doing at present, or overtly if it feels it has little more to lose. It has been quite restrained so far, but cutting off gas supplies to the Ukraine, and thus to much of Europe, which relies on the same pipeline system, would rapidly bring the former to its knees and bring serious hardship to many Eurozone members. This gas supply cannot be quickly replaced from other sources if at all – indeed the fear of Russia cutting off supplies is why the sanctions to date have been pretty limited – but if they are taken to the next stage …..!
Russia obviously believes in gold – as seemingly does China, the other modern day superpower. Does the West believe in it any longer? It’s hard to tell. On the face of things no. But who knows what is said behind closed doors except those directly involved – and they aren’t saying. Thus it is still perhaps a good idea to hedge one’s bets and hold some gold against yet another global financial crisis precipitated by tit for tat sanctions. Particularlywhen one is aware that today’s fiat currencies have virtually no backing at all and could revert to the value of the paper on which they are printed. Let’s hope it doesn’t happen, but it may be better to be safe than sorry.
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