Raw materials in this article.
Forex in this article
• MarketWatch financial journalist defends investing in gold
• Dollars and euros are no longer wanted for commodity payments to Russia
• Gold as a hedge if the dollar’s reserve currency status falters
Gold has always been considered the so-called “safe haven” in times of crisis and, according to the opinion of several investment experts, it should not be missing in any portfolio to diversify. As MarketWatch columnist Brett Arends describes in one of his most recent articles, the Ukraine war in particular would once again demonstrate why the portfolio should contain a gold component in addition to stocks and government bonds.
Oil and gas payment dispute
The background for this is the sanctions that Western countries imposed in response to the Russian invasion of Ukraine and which, among other things, have a massive impact on trade between the Russian state and Europe. The main focus here is on payments for commodities like gas or oil. Many European countries, including Germany, depend on Russian supplies, but Russia no longer wants to accept payments in dollars or euros due to sanctions. Instead, under a decree by Russian President Putin, gas payments will now be made in the national currency, the ruble, because, according to Kremlin spokesman Dmitry Peskov, this is the “preferred and most reliable option.”
The reason is, on the one hand, the drastic drop in the Russian ruble since the start of the war in Ukraine and the risk that transfers in euros or dollars could be confiscated or frozen as part of the sanctions and the Russian gas company GAZPROM in Ultimately, they have no access to money.
The dollar is no longer of interest to the Russian government; instead, gold is preferred
However, according to Trending Topics, Russian Energy Commission Chairman Pavel Zavalny also recently suggested that “friendly states” could also pay for Russian oil and gas with cryptocurrencies such as Bitcoin. More interestingly, according to Brett Arends, Zavalny also expressed support for payments to be made in “hard currency,” with the president specifying that for Russia this is gold, not the US dollar. Arends Zavalny reflects thus: “The dollar is no longer a means of payment for us, it has lost our interest.” In fact, the greenback is nothing more than “candy wrappers” anymore.
gold as a hedge
As the financial journalist goes on to explain, this step could be a declaration of war on the global reserve currency, the US dollar, especially if other countries like China or India decide to take a similar step. At the same time, it is an important argument for investors to include gold in their portfolios. Not because the shiny precious metal is likely to appreciate in value over the long term. But because it represents a safeguard in times of geopolitical or financial crisis, in case “non-Western countries decide to challenge the financial hegemony of the United States and the ‘dollar king,'” as Arends puts it.
Finally, gold would enjoy some advantages over other currencies. The precious metal is completely private and also independent of banking systems like SWIFT. In addition, it is a widely used currency that is not in the hands of a single country. As Trading Economics writes, Russia would have possessed 2,298.53 tons of gold in the third quarter of 2021.
Western states want to limit Russia’s access to gold trade
However, Western countries have now also taken steps to make it more difficult for Russia to trade gold. According to the German Press Agency, a US government official said two weeks ago that sanctions should be imposed on all gold transactions involving the Russian central bank. The Russian central bank responded by announcing its intention to buy gold from Russian banks, Reuters reported. Between February 28 and June 30, gold will be purchased at a fixed price of 5,000 rubles per gram.
The gold price itself has also shown its counter-movement during the current crisis. The price of the precious metal rose 9.17 percent in the first quarter of 2022.
More news on the price of gold
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