In response to Russia’s war on Ukraine, the U.S. and G-7 countries have launched a currency war against the Kremlin. Sanctions imposed on the Russian central bank have effectively blacklisted the country from the U.S. dollar-dominated global financial system.

Now the Biden administration is attempting to prevent Russia from using gold as an alternative medium of exchange.

Last week, the Treasury Department declared, “US persons are prohibited from engaging in any transaction – including gold-related transactions – involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.”

In recent years, Russia has significantly increased its gold reserves.

It currently possesses the fifth largest stockpile in the world, worth an estimated $140 billion.

U.S. officials want to prevent Russia from selling gold in order to fund its war machine. But Russian officials seem more inclined to take gold in lieu of dollars as payment in international trade.

Russia declared that “unfriendly” countries must now pay for Russian gas and other products in rubles or in gold – a move that boosted the value of the beleaguered currency.

Moscow is even considering adopting Bitcoin as an alternative means of payment in international trade, according to reports.

“If they want to buy, let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency [Russian rubles],” said Pavel Zavalny, chairman of the Russian Duma Committee on Energy.

Zavalny is also urging China to de-dollarize and switch to settlements in gold, rubles, or yuan.

China, India, and the Far East are pivotal players in the global currency wars. If they opt out of the increasingly expansive U.S. sanctions regime, a new bipolar monetary order could emerge.

Global confidence in the Federal Reserve Note “dollar” as world reserve currency is rapidly eroding.

If the U.S. can suddenly declare that it is freezing the dollar assets of a major foreign central bank and banning their gold from circulation, a lot of other countries will be worried they might be next to get blacklisted. They will naturally want to have a Plan B in place.

It is impossible to predict exactly how the erupting currency wars will reshape the global monetary system.

One possibility is that gold will play a much more prominent role than before.

Ever since the U.S. rescinded gold convertibility in 1971, the fiat “dollar standard” has been in force – backed implicitly by oil and the promise of Saudi Arabia and other OPEC producers to accept dollars as payment.

The petro-dollar is now at risk of losing its hegemony. While the U.S. has historically been able to use its financial and military might to keep Middle Eastern countries in line, it may be overplaying its hand in trying to force the entire world to shun Russia.

As with waging any war, however justified it may be, there will be blowback. The overt weaponization of the financial system against Russia will result in counterattacks directed at the Federal Reserve Note.

A currency’s value cannot be maintained through force alone. Plenty of dictatorships throughout history have gone down the economically ruinous path of hyperinflation.

America’s recent inflation spike may be an ominous sign of what’s to come.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD holds above 1.0700 after US inflation data

EUR/USD holds above 1.0700 after US inflation data

EUR/USD stays in the lower half of its daily range but continues to trade above 1.0700 in the early American session on Friday. The data from the US showed that the annual Core PCE Price Index declined to 4.9% in April as expected, making it difficult for the dollar to gather strength.

EUR/USD News

GBP/USD trades above 1.2600 as dollar struggles to find demand

GBP/USD trades above 1.2600 as dollar struggles to find demand

GBP/USD clings to daily gains above 1.2600 and remains on track to end the week in positive territory. The greenback struggles to attract investors after the data from the US showed that PCE inflation softened in April. 

GBP/USD News

Gold pulls away from daily highs, holds above $1,850

Gold pulls away from daily highs, holds above $1,850

Gold has lost its traction in the second half of the day on Friday and declined toward the $1,850 area. The benchmark 10-year US Treasury bond yield staged a modest rebound on the US PCE inflation data, not allowing XAU/USD to preserve its bullish momentum.

Gold News

Terra’s LUNA 2.0 support expands with Binance and Kraken welcoming the airdrop, here’s how you need to prepare

Terra’s LUNA 2.0 support expands with Binance and Kraken welcoming the airdrop, here’s how you need to prepare

Terra’s LUNA fork proposal has passed with 65.5% votes, Revival Plan 2 in action without algorithmic stablecoin UST. LUNA price could wipe out losses incurred by holders in the colossal crash of LUNC and UST. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures