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The Russian invasion of Ukraine, which Biden administration officials predicted would occur this week, has not occurred as of the time of this recording. The monetary metal rose $30 on Thursday to close at $1,900 for the first time since last spring, while silver recovered to $24 per ounce. Metals prices rose as a result of inflation data and geopolitical concerns centred on Russia. It’s possible that the latest round of Russia scaremongering will turn out to be exaggerated.
Mining stocks are confirming gold’s upward trend. The HUI gold miners index reached its highest level since last June on Thursday. The mining sector’s performance was especially impressive given that it occurred on the year’s worst down day for the broad equity market averages.
Bitcoin succumbed to selling pressure as well. The cryptocurrency sector appears to be far more strongly correlated with the technology sector than with gold or inflation. Whatever the merits of cryptos as an alternative asset class – and there are some – no digital currency will ever be able to replace hard assets such as gold and silver in a diversified portfolio.
The mainstream media aggressively promoted the idea of an impending invasion. Biden administration officials also fed biassed Associated Press reporters intelligence suggesting that a prominent alternative financial media site is secretly spreading “Russian propaganda.”
Since 2014, Russia’s central bank has been substituting gold for Federal Reserve Notes. According to the most recent reports, the Bank of Russia now holds 23% of its foreign reserves in gold and only 22% in US dollars.
Russia is turning to gold in part because it faces new economic sanctions imposed by the United States and its allies. Some argue that the Federal Reserve should freeze all US dollar assets held by Russia’s central bank in Fed accounts. In attempting to punish Russia, US officials risk hastening the world’s de-dollarization. And, in the end, this may play right into Putin’s hands.
Such actions would cast doubt on the trustworthiness and safety of holding US dollars. If US officials can simply decide to cancel foreign central banks’ accounts, many foreign countries will reconsider holding them as reserves.
The Kremlin or Russian propaganda campaigns are not to blame for the US currency’s declining credibility. It is rapidly losing value and prestige as a result of Washington, D.C.’s aggressive debt growth and currency creation policies.
The Consumer Price Index readings this month are at their highest levels in 40 years. Producer price increases have reached all-time highs. And, you guessed it, import and export prices came in much higher than expected this week.
Geopolitical tensions rarely cause major market trends. They drive volatility in the short run, but investors would be wise to focus on more persistent drivers of major trends in the long run. Currency depreciation is unquestionably one of them.
Neither the Fed nor the establishment media foresaw the inflation problem that now afflicts the US economy. Some alternative and independent sources, on the other hand, did.