Golden Trap: how Russia and China will stop dollar hegemony

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UNITED STATES (VOP TODAY NEWS) — American analysts understand why Russia and China are buying more and more gold. The goal of Moscow and Beijing is to change the rules of the game in the global economy, stopping the hegemony of the dollar.

The accumulation of gold will lead to the fact that its price will soar, and paper currencies will turn into “poker chips.” About how Russia and China are preparing a trap for the West – in the material RIA.

Need more gold

According to the calculations of the World Gold Council (WGC), the volume of this precious metal on the balance of central banks increased by 651 tons over the past year – the highest figure since 1971, when the United States abandoned the gold standard. Almost half of this gold was bought by the Bank of Russia.

Now the Central Bank has 2112 tons of gold – for the sum of about 87 billion dollars, a record volume in the entire history of modern Russia. Over the past ten years, the share of gold in the reserves of the country increased from 3.5 to 18.6 percent, while investments in US bonds and the dollar decreased to a minimum. As a result, Russia ranked fifth in the world among holders of gold reserves.

The second buyer of the precious metal after the Russian Federation was China, which has a reserve of 1,853 tons for 76 billion dollars. At the end of last year, Beijing after a more than two-year hiatus sharply increased gold purchases, which led to an increase in its value to a semi-annual maximum of $ 1,300 per ounce.

India also seeks to enter the “golden club”. Last year, the Reserve Bank of the country increased its gold reserves by almost 42 tons, bringing it to a record high of 600.4 tons.

The worsening geopolitical and economic uncertainty prompted central banks to decide to diversify their reserves and focus on investing in safe and liquid assets, the WGC said.

Since the beginning of the year, gold prices have been adjusted, but financial analyst Bill Halter said in an interview with FXStreet, this is not surprising: it is now the middle of the correction period. “For Russia and China, this is an obvious plus, because they get more ounces of gold for dollars,” says Holter.

Bloomberg estimates that the diversification of reserves, which is carried out by the leading world economies, will support global demand for bullion and – as a result – prices.

Part of a big plan

Accumulating gold, the state, of course, seek to insure against various risks – primarily geopolitical and sanctions.

Unlike other currencies, stocks or bonds, gold is an asset that is not liable for third parties.

Therefore, for example, the United States cannot impose sanctions on gold belonging to Russia, notes Ronald-Peter Stoeferle, an analyst at the German investment company Incrementum.

“Gold is the hardest currency in the world, subject to only minimal natural inflation, and good insurance against dollar fluctuations. This is a highly liquid resource, and large gold reserves strengthen investor confidence in the ruble,” the newspaper Neue Zürcher Zeitung quoted.

Gold is becoming increasingly important as an insurance against default by the United States. As Bill Holter notes, China and Russia are well aware that it will be very difficult for the States to settle their debt obligations and ultimately the purchase of US government bonds is useless. “How do they (China and Russia. – Approx. Ed.) Defend themselves? They are buying gold. Gold and silver are direct competitors of any paper currency,” explains the analyst.

Another expert, market analyst and professional trader Gregory Mannarino fully agrees with Holter. “The environment in which we now exist is not like anything else in world history,” he said. “It has nothing to do with a free market, a market economy. The continuous issuance of government debt securities is all that keeps an economy from collapse. There is no recovery, there is no economic boom. A debt boom is all we have. And not only here in the United States. It is a global phenomenon.”

Explosive rise in prices

Analysts are confident that in the current situation the purchase of precious metals is the best strategy for both central banks and private investors. “Just as the biggest bubble in history is being inflated in the US government debt market, gold and silver remain record undervalued,” Mannarino said.

“So now we need to bet against government debt and buy solid assets such as gold and silver. Physical gold today – the most undervalued asset in the world. Not a single politician and not a single head of the Federal Reserve System can change this. And nothing can stop the explosive growth in gold prices that we will see in the future.”

The largest investment banks agree with this forecast. According to the forecast of Goldman Sachs, the continuous operation of the printing press, increasingly threatening the stability of the global economy, will accelerate the prices of real assets, primarily gold.

Growth will also contribute to the future decline in world production of this precious metal.

According to Newmont Goldcorp, one of the world’s largest gold mining companies, by 2022, production will drop to the level of the beginning of the century. According to the US Geological Survey, while maintaining production rates at current levels, gold reserves in the bowels of the earth will be exhausted by 2034.

Bill Holter is confident that it is on the threshold of the collapse of the American debt market that Russia and China are striving to acquire as much gold as possible.

“The far-reaching plan of Moscow and Beijing is to deplete the gold reserves of the West. After problems with the supply of this metal, Russia and China will be able to destroy the hegemony of the US Treasury and the dollar as a reserve currency and establish their own rules in the world economy”, – Halter concludes.


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