CNBC: Could Russia back its currency with gold?


It’s no secret that Russia has been purchasing a lot of gold lately. Between July and September 2014, central banks throughout the world added a total of 92.8 tons of gold to their reserves, with Russia accounting for 59% of net purchases made during that time period. It has now surpassed China in the amount of gold held by its central bank, and is number five in the world for reported gold holdings.

Analysts are now wondering if Russia will at some point back its struggling currency with gold. Below are a few of their thoughts.

“It is already in Russia’s interest…to base their economy on sound money, aka gold.”

Alasdair MacLeod, head of research at online bullion exchange GoldMoney Foundation, believes Russia, China, and other Eurasian states are accumulating gold in attempt to replace the U.S. dollar as the currency of international trade. He told CNBC “It was (and still is) in Russia’s power to adopt a gold standard.” He doesn’t see it as very likely, but thinks it could be possible if Russian President Vladimir Putin is “provoked sufficiently.” In his words:

“It is already in Russia’s interest to cast itself off from inflating western currencies and to base their economy on sound money, aka gold.” [emphasis added]

“At this point in time, it may make more sense for Russia to accumulate gold reserves…”

Jim Rickards, senior managing director at Tangent Capital and well-known gold bug, told CNBC he thinks Russia will move to a gold-backed currency – just not anytime soon. “Russia will continue to acquire gold, but will need hard currency reserves also to bridge the gap between today’s position and any future intentions,” he said. Phoenix Kalen, director of emerging markets strategy at Societe Generale, think it’s “highly unlikely” that Russia would move towards a gold-backed currency, due in part to the Russian ruble already being closely tied to the price of oil. She concluded:

“At this point in time, it may make more sense for Russia to accumulate gold reserves, as it would help the country to diversify away from U.S. assets, stay ahead of the U.S. monetary policy tightening cycle which may adversely impact U.S. Treasury holdings, and benefit from the inflation protection provided by gold assets.” [emphasis added]

The takeaway for gold investors

While the exact motives behind Russia’s recent gold buying spree are not known, there is speculation that it may be for diversification away from the U.S. dollar and/or to undermine the dollar’s status as the world’s reserve currency. If the central bank of one of the most powerful countries in the world may be turning to gold for these reasons, then why shouldn’t you, for your own financial future? American Bullion can help you purchase physical gold coins or bars for secure delivery to your doorstep, or even assist you with adding them to a retirement account. Call us today at 1-800-326-9598 or request your Free Gold Guide to find out how easy it is.


Image: By Центробанк РФ (scan) [Public domain], via Wikimedia Commons