Russia is buying gold as hedge

The Ruble has the highest positive real interest rates of any currency in the world (gold not included). If it were the only currency the gold price would be dropping. So if the Ruble is truly treading water it has to either be because the currencies it is being compared against are overvalued or the Ruble is undervalued.

This would not be impacted by their gold buying however unless they initiate a gold standard. At that time the currency will be stronger than it would have been had they not bought the gold, but for now it's irrelevant to the currency. Rubles are the best currency play IMO due to positive real interest rates which are the sole indicator I look at for PM investment, notwithstanding digital currencies which are high risk/reward and I wouldn't touch them unless I had a need to use them.

Of course the USD as the world reserve currency of which the majority is held outside the united states is immune to inflation on the dollars outside the US so the value of the USD is grossly overvalued compared to what it would be if it were not the world reserve currency. If at some point it is no longer the reserve currency all that prior immunity will disappear and the diverted inflation will suddenly hit the deck.

 

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The action doesn't mean that much, other than to show that the more fiscally responsible governments of the world are stacking gold, it's a good indication that it will be valued in the future, potentially more than it is now.

It's also a possible indicator that the dollars days may be numbered, in the past Russia and China added U.S. T-bonds to their reserves, but now it would appear they are moving towards gold and have stopped purchasing T-Bonds.

Going in another direction it is rarely mentioned just how easily China or Japan could send the U.S. economy into a tailspin if they decided to sell all/or a significant portion of their T-Bonds.

http://www.davemanuel.com/us-national-debt-clock.php

1. China, Mainland, $1170.1 billion dollars
2. Japan, $1132.8 billion dollars
3. Carib Bnkng Ctrs**, $283.7 billion dollars
4. Oil Exporters*, $260.1 billion dollars
5. Brazil, $257.0 billion dollars
6. All Other, $245.7 billion dollars
7. Taiwan, $193.1 billion dollars
8. Switzerland, $186.9 billion dollars
9. Russia, $164.1 billion dollars
10. United Kingdom, $145.0 billion dollars

If a trillion dollars was brought into the market the results would likely be cataclysmic for the U.S. dollar. Very unlikely though since their economies are quite intertwined and it would certainly have a great negative affect on the Chinese economy, but interesting nonetheless just how vulnerable the dollar is at current time. (and with the actions that are being taken its only getting worse)

 

I read an article a couple months ago that the Fed is buying 90% of all newly created US Treasuries. Yes China and Japan may still own a lot, but they are not nearly the buyers they used to be. Japan is buying European debt right now though I am not certain why that may be more attractive than US debt, maybe for diversification. If they all did decide to sell I don't think it would be a big deal because the Fed would just buy it all up with new money, and inflation is under control right?

 

I agree with you! The Fed would just make a few key strokes to buy debt from others and make the Fed the real King in the USA.

 

The first Nation to go back to a real Gold Standard could be a huge winner in the World.

 

Gaddafi was exploring the possibility of an African gold backed currency months before his country was invaded, it can be a dangerous proposition.

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