Dumping the dollar: Record gold price justifies Moscow's choice to abandon greenback & bet on precious metal
Washington's weaponization of the dollar in an effort to crush Russia’s economy seems to be backfiring. The policy encouraged Moscow to pivot to gold and this week the cost of an ounce broke the $2,000 barrier for the first time.
Russia's choice to move away from storing Benjamins as a reserve currency and to gradually replace the dollar in trade was accompanied by a relentless gold-buying spree. The moves were a reaction to US sanctions, the primary tool of America's economic war on the world's largest country.
On Thursday, an ounce of the precious metal traded at a maximum of $2,005.4 on the US COMEX Commodity Exchange. The growth in gold’s popularity is directly linked to global economic uncertainty due to the Covid-19 pandemic, with it being seen as protection against inflation as the US federal reserve money-printers work overtime.
The price might still be on its way up, with Goldman Sachs analysts predicting a rise to $2,300 within 12 months.Also on rt.com Bye Bye Benjamin! Russia & China speed up de-dollarization process: most trade no longer conducted in greenbacks
The increase in the value of gold comes as a great victory for Moscow's policy which moved vast sums away from fiat currency and toward the commodity. In the last five years, the country has spent more than $40 billion building up a massive pile of the traditional safe haven, protecting state finances from currency volatility.
“The Americans are using the US dollar as a weapon, and Russia is absolutely correct in diversifying its foreign exchange reserves,” John Mayer, partner of the investment and consulting company SP Angel, told Moscow news outlet Gazeta. “Gold is the best liquid investment if you do not want to be held hostage by the dollar.”
In September 2014, Russia’s gold holding was just 10 percent of the country’s entire forex reserves – now the proportion stands at 23 percent, with 2,299.9 metric tons.
In March, Russia’s central bank announced that it would stop buying gold, leading some analysts to believe the country’s mining operations would start selling their metal abroad while the price is high. The prediction turned out to be correct, as the second quarter of 2020 saw the value of gold sales to foreign buyers overtaking gas exports for the first time since at least 1994.
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