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"We have never escaped a recession from this point," JPMorgan economists are telling clients about one indicator, noting stocks have never hit a low before the Fed has stopped hiking interest rates.

Despite growing hopes the U.S. may ultimately avoid an anxiously anticipated recession, JPMorgan economists are warning clients that a flurry of indicators are still flashing increasingly eerie warning signs—making it likely the economy and stocks may waver in the coming months, particularly since the effects of the Federal Reserve's rate hikes could take years to ripple through markets.

Key Facts:

"Signals are pointing to trouble ahead," JPMorgan analysts led by Mislav Matejka wrote in a Monday note, positing a slew of warning signs that indicate the latest stock market rally should continue to fade before the end of March and that this quarter could "possibly" mark the stock market's high for the year.

For one, the yield curve has remained "heavily inverted"—an occurrence that has preceded every U.S. recession over the past 50 years—despite growing optimism the U.S. could skirt an economic downturn; the curve is the most inverted it's been since the 1980s, and JPMorgan cautions, "We have never escaped a recession from this point."

Additionally, the U.S. money supply, which measures safe assets households and businesses can use to make payments, has fallen abruptly since March and is negative on a yearly basis for the first time since 2006, all while banks have started enforcing stricter lending standards—leading to a sharp decline in credit demand that's been typical ahead of past recessions.

"The damage is done, and the fallout is likely still ahead of us," the analysts write, cautioning that the Fed's aggressive interest rate hikes over the past year could take up to two years to ripple across the economy.

Already, mortgage payments as a share of income have doubled from 13% to 26% and the savings rate has plummeted to almost zero, but Matejka notes the Fed is still expected to hike rates at least two more times this year, and stocks have never hit a cyclical low before the Fed has stopped hiking.

Despite lingering bearishness, others remain much more upbeat: Last week, Goldman economists led by Jan Hatzius pinned the odds of a recession at just 25% (well below average projections of 65%), reflecting "continued strength in the labor market" after a blockbuster jobs report and early signs that businesses are becoming more optimistic about the economy.

The Fed is slated to release a summary of its latest meeting on Wednesday—giving a glimpse into how officials are thinking about the economy as they continue their most aggressive tightening campaign in decades. Last week, Cleveland Fed President Loretta Mester admitted she saw a “compelling” case for a second half-point rate hike earlier this month, rather than the more modest quarter-point hike ultimately authorized. Though she welcomed the moderation in inflation readings since last summer, she cautioned, "the level of inflation matters, and it is still too high.”

Key Background

Amid record consumer spending and crippling supply-chain constraints, inflation skyrocketed to a 40-year high of 9.1% in June—forcing the Fed to drive up interest rates in order to help temper consumer demand and ease rising prices. With the central bank’s rate hikes slowing down the economy, many experts have argued the Fed could be risking an unnecessary recession, but increasingly, others have warned inflation could remain at historically high levels for longer than expected or even flare up again. “Markets are admitting the Fed may not be close to done,” Sevens Report strategist Tom Essaye wrote in a Tuesday note, as stocks sank following worse-than-expected retail earnings.

What We Don't Know

Though it's unclear when the Fed will stop raising rates, analysts at Goldman and Bank of America added another rate hike to their forecasts after a hotter-than-expected inflation reading last week. They now expect the central bank will raise rates to a top level of 5.5%, potentially hitting the highest level in more than 20 years.

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  • Ray Dalio said China is winning the trade war with the US as the yuan makes gains internationally.
  • The Bridgewater Associates CIO mentor also warned the US is on the "brink" of conflict with China.
  • But Dalio added that the biggest threat to the US remains domestic.

China is pulling ahead in the trade war with the US, according to Bridgewater Associates founder Ray Dalio.

In a Dubai conference on Wednesday, he said China's yuan is being used more widely in global trade and that players who can tap both the US and Chinese markets will emerge victorious in the trade war.

"China's winning the trade war if you just take the numbers – the percentage of world trade and dominance," Dalio said, according to Bloomberg.

The US-China trade war that began during the Trump administration hasn't abated under President Joe Biden.

His administration has been putting pressure on allies to join the US in limiting China's ability to access semiconductor technology to thwart Beijing.

Meanwhile, US-China political tensions have been heating up in recent days after the US spotted and then shot down a Chinese spy balloon that was flying over the US, including nuclear weapons facilities.

On Wednesday, Dalio, who is now CIO mentor at Bridgewater, reiterated his warning that the US and China appear to be nearing the "brink" of a full-scale conflict. He cautioned that his comments weren't a certainty, and added that "brink doesn't mean we'll go over the brink."

But the largest threat to the US remains at home, with Dalio citing "a deterioration of infrastructure, education, political conflict, leadership" as contributing to domestic issues.

"Basically, be strong. If you're strong and healthy, you'll be domestically and internationally well-off," he said.

Editor's note: this article has been updated to correct Dalio's title.

Story by Brian Evans 2/15/2023  Redacted shorter to keep to important points and bullet points added by HGG  https://markets.businessinsider.com/news/stocks/china-winning-us-trade-war-dollar-vs-yuan-ray-dalio-2023-2

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  • Warehouses and distribution centers are pushing rates higher, with U.S. storage prices up 1.4% month-over-month and nearly 11% year-over-year.
  • An inventory glut will impact consumer prices, with the latest consumer price index data due out Tuesday.
  • Charges to use cargo containers as temporary warehouse space are going to explode in the coming quarters, according to one port and intermodal expert.
  • From construction to retail, key sectors of the economy expect pricing pressure to remain.

As the markets prepare for the latest consumer price index data to be released on Tuesday, logistics managers are warning of a persistent source of inflation in the supply chain and saying consumers should be ready for the effect it will have on their wallets.

While many sources of supply chain inflation that stoked higher goods prices have come down sharply — including ocean freight rates and transportation fuels — bloated inventories due to a lack of consumer demand are sustaining upward pressure on warehouse rates.

"In 2022, we saw rate levels for international air and ocean and domestic trucking fall back down to earth," said Brian Bourke, global chief commercial officer at SEKO Logistics. "But inflationary pressures remain where demand outpaces supply in 2023, including in warehousing through most of the United States, domestic parcel and labor."

One reason for the imbalance between warehouse supply and demand is the lack of new facilities coming into the market.

"National warehousing capacity remains low and will remain tight for the foreseeable future as U.S. industrial construction starts have fallen considerably year-over-year due to rising interest rates," said Chris Huwaldt, vice president of solutions at WarehouseQuote.

Consumer prices have come down sharply as goods inflation that surged during the pandemic has cooled. And Federal Reserve Chairman Jerome Powell expressed confidence after the most recent Fed meeting that disinflation "has begun." December's CPI was the smallest year-over-year increase since October 2021, at 6.5% on an annual basis, down from a 9.1% peak in June 2022.

The Fed is now more focused on services inflation, in particular labor prices, as it expects the pressure in goods inflation to continue a downward trend. But the logistics issues suggest there will be some elements of sticky inflation on the goods side of the equation.

"The market is starting to sense that the very comforting disinflation story is more complex than we would like it to be," Mohamed El-Erian, Allianz chief economic advisor, told CNBC's "Squawk Box" on Monday morning. "The comforting story was simple: Goods disinflation continues and service inflation comes down, that wonderful concept that Chair Powell calls core services, ex-housing, comes down and, lo and behold, we don't have an inflation problem. Now we're starting to see certain goods reverse this inflationary process so there's more uncertainty about inflation."

Some shippers are holding their products in containers on chassis because of full warehouses and distribution centers, but this means they're incurring charges which are passed on to the consumer. Shippers are given an allotted amount of free time during which they are not charged for holding a container, but once those days expire, they start to be charged per diem charges (i.e., late container charges that are charged for containers out of port).

Containers left on chassis create two costly problems, said Paul Brashier, vice president of drayage and intermodal for ITS Logistics. It prevents those chassis from being used to move newly arriving containers, putting additional stress on chassis pools throughout the U.S., especially inland rail ramp pools. Shippers will also be charged fees for the dwelling chassis — separate from the per diem charge shippers pay per day once the container is out of use beyond its free time. "This can lead to tens of millions of dollars in penalties," Brashier said.

He predicts that per diem charges are going to surge in the second and third quarters of this year.

"These are on top of charges for warehousing, which are still at historic highs," Brashier said. "Late fees and warehouse fees are passed onto the consumer, which is why we are not seeing products fall as much as they should."

National storage pricing is up 1.4% month-over-month and 10.6% year-over-year, according to WarehouseQuote.

Many small businesses, which represent the largest share of the U.S. economy in number but are often the last to benefit from a decline in supply chain pricing, tell CNBC they do not believe inflation has peaked.

For shippers with inventory imbalances, Brashier says these charges could cost tens of millions of dollars per quarter. Brashier warns these charges, on top of weaker consumer demand, will ripple through earnings.

ITS Logistics is advising clients to avoid a hit to their bottom line by considering short-term, pop-up storage offered by third-party logistics providers, or 3PL, and grounding operations. "This will reduce reliance on storing freight in ocean containers," Brashier said.

3PL providers include C.H. Robinson, Expeditors, UPS Supply Chain Solutions, Kuehne + Nagel (Americas), J.B. Hunt, XPO Logistics, GXO Logistics, Uber Freight, and DHL Supply Chain (North America).

Mark Baxa, president and CEO of the Council of Supply Chain Management Professionals, tells CNBC that inflation and higher interest rates are driving supply chain leaders to critically examine working capital investments in inventory and operations in relation to consumer demand forecasts.

"In the short run, supply chains have moved closer to finance teams to manage cash flow, coupled with greater efforts to manage costs across operations. Considerations have moved to close-in review and total cost management across the business, including people, technology, warehousing and transportation investments," Baxa said.

One industry facing supply chain inflationary headwinds is construction.

Phillip Ross, accounting and audit practice leader of Anchin's architecture and engineering group, said supply chain inflation has made it more difficult for companies to manage completion times for projects.

"In some cases, we are looking at six to eight months before materials will be available," Ross said. "Construction, as one of the largest industries in the U.S., is uniquely impacted by the supply chain, which led to construction companies experiencing not only delays in their work but also increased prices for materials."

Some inflationary elements stemming from Covid-related supply chain disruptions remain, according to Jim Monkmeyer, president of transportation at DHL Supply Chain. These include higher costs related to diversion of containers to East Coast ports, production disruptions and shortages in China and elsewhere, and intermodal constraints forcing higher cost alternatives, such as air freight and expedited truck.

Even with the rate of inflation slowing, higher consumer prices are expected to remain for a variety of other reasons, from contract terms set with suppliers before recent disinflation and company desire to maintain profit margins.

Steve Lamar, CEO of the American Apparel and Footwear Association, tells CNBC that shippers are also finding it harder to absorb extra costs as a result of the Trump-Biden tariffs on China. "These tariffs are now hitting $170 billion and are baked into the cost of goods and, hence, higher prices at the register," Lamar said. "The tariffs make it harder for companies to absorb other inflationary costs."

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  • "This was also comfortably within the 20-60t range of reported purchases which has been in place over the last ten consecutive months of net buying,"
    (Wrote Krishan Gopaul, Senior Analyst at the WGC.)

(Kitco News) After a record-setting year in 2022, central banks remain very interested in gold at the start of 2023, according to the World Gold Council (WGC). In January, central banks bought 31 tonnes of gold, a monthly increase of 16%, said WGC in a note Thursday.

Most of the buying was done by three central banks, and they are not new players — Turkey, China, and Kazakhstan. Turkey was the largest official gold buyer in 2022, and China is known to have aggressively stepped up its gold purchases towards the end of last year.

Kicking off the first month of the year, Turkey bought 23 tonnes of gold, bringing its total gold reserves to 565 tonnes. China purchased 15 tonnes of gold in January on top of the 62 tonnes reported in November and December. This brought China's total gold reserves to 2,025 tonnes. Kazakhstan's central bank added four tonnes of gold, bringing the total reserves to 356 tonnes. The European Central Bank (ECB) had a unique addition of two tonnes of gold. But the uptick was due to Croatia joining the currency union, which requires that a new member-country transfers some amount of gold to the ECB as part of a larger transfer of reserve assets, the WGC noted. To do the transfer, Croatia bought the two tonnes in December. One central bank decided to go in another direction. Uzbekistan's central bank sold 12 tonnes of gold in January. Its gold reserves are now at 384 tonnes, which is 66% of its total reserves.

In January, gold rose from $1,860 an ounce to a peak of around $1,960 an ounce. At the time of writing, April Comex gold futures were trading at $1,842.30, down 0.17% on the day. The WGC views this increase in central banks' appetite as remaining strong throughout this year.

"We see little reason to doubt that central banks will remain positive towards gold and continue to be net purchasers in 2023," the report said. "The healthy January data we have so far gives us little reason, at this time at least, to deviate from this outlook."

Last year, central banks purchased 1,136 tonnes — the most on record and a more than 150% increase from last year.

"Geopolitical uncertainty and high inflation were highlighted as key reasons for holding gold," the WGC said in its Gold Demand Trends report. The Central Bank of Turkey bought the most gold out of all central banks as it searched for protection against unchecked inflation. In the fall, Turkey's inflation accelerated to 85% before slowing to 64% in December. China was also the big highlight last year, as the People's Bank of China (PBoC) resumed gold buying for the first time since 2019.

Story by Anna Golubova 1/31/2023  Redacted shorter to keep to important points and bullet points added by HGG.   https://www.kitco.com/news/2023-01-31/Why-is-central-bank-gold-buying-at-55-year-highs.html

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The Dollar's Dominance of Global Trade and Reserves is Facing Several New Threats Getty Images

  • The dollar’s supremacy in global trade faces fresh challenges as several countries float plans to use local currencies in commerce.
  • Russia and Iran are working to create a gold-backed stablecoin, while China is increasingly using the yuan in its oil trades.
  • Here are 5 rising challenges to the greenback’s dominance of international trade and investment flows.

The Dollar’s dominance of global trade and investment flows is facing a slew of new threats as many countries push plans to boost the use of alternative currencies.

Nations from China and Russia to India and Brazil are pushing for settling more trade in non-dollar units – with plans ranging from the use of local currencies to a gold-backed stablecoin and a new BRICS reserve currency.

For decades, the greenback has reigned supreme as the world's reserve currency and is widely used in cross border trade, especially for commodities such as oil. Thanks to its relative price stability, investors see it as a safe-haven asset in times of heightened economic and geopolitical uncertainty.

The dollar was further bolstered last year by a surge in US interest rates that made it attractive to foreign investors seeking higher yields. It surged 17% during the first nine months of 2022, but has since lost some of its shine.

Against this backdrop come the latest threats to the greenback's reign — here are five currency projects from across the world that are ultimately aimed at undermining the dollar's supremacy.

1. Russia and Iran Eye a Gold-Backed Stablecoin

  • Russia and Iran are working together to launch a cryptocurrency backed by gold, Vedmosti reported.
  • The stablecoin could replace the US dollar for payments if Russia legalizes crypto in cross border trade.
  • A "de-dollarization" trend has already begun as the greenback's dominance makes purchases more expensive.
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Stablecoins are cryptocurrencies that source their value from an asset like the US dollar or gold, which are less volatile in price than digital assets. That protects investors against wild swings in the wider crypto market.

In recent months, Russia and Iran have accelerated their push to "de-dollarize" — to move away from using the greenback in commerce — think tank the Jamestown Foundation has said. They aim to increase their volume of trade to $10 billion per year via moves such as developing an alternative international payments system to SWIFT, which they are banned from.

2. Brazil and Argentina Plan a Common Currency

Brazil and Argentina recently announced they are gearing up to launch a joint currency, named the "sur" (south), that could eventually become a euro-like project embraced by all of South America.

A common currency could help boost South American trade, the countries' leaders said in a joint statement, because it evades conversion costs and exchange rate uncertainty. That could erode the dollar's dominance in the region, given the greenback accounted for as much as 96% of the trade between North and South Americas from 1999 to 2019, according to the Federal Reserve.

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3. UAE, India Look at Using Rupees in Non-Oil Trade

Meanwhile, the United Arab Emirates and India have floated the idea of conducting non-oil trade in rupees.

The move would build on a free trade agreement signed last year, which aims to boost trade excluding oil between the two countries to $100 billion by 2027.

China has also pondered on the idea of settling non-oil trade in local currencies that exclude the greenback, according to minister of state for foreign trade of the UAE Thani bin Ahmed Al Zeyoudi.

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4. China Pushes for the Yuan to Replace the Dollar in Oil Trades

China, for another, is looking to weaken the dollar by pushing for the yuan to replace the greenback in oil deals, given its increased trade with Russia after it invaded Ukraine.

The move looks to chip away at the petrodollar regime in place since the 1970s, where global oil transactions are largely settled in dollars.

Toward the end of last year, Beijing began buying Moscow's crude at steep discounts, completing those purchases in yuan rather than dollars, giving rise to the so-called petroyuan.

With a stronger greenback, oil contracts become more expensive because the deals are largely priced in the US currency, and this also explains China's shift away from the dollar.

Kpler analyst Viktor Katona said Russia has effectively become "an Asian nation that in my opinion has introduced the yuan into large-scale oil trade."

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5. Russia, China Propose a New Reserve Currency

Last year, Russia and China kickstarted talks to develop a new reserve currency with other BRICS countries in a challenge to the dollar's dominance.

The new reserve unit would be based on a basket of currencies from the group's members: Brazil, Russia, India, China, and South Africa.

The dollar's reign as the chief reserve tender is already on the wane as central bankers diversify their holdings into currencies like the Chinese yuan, the Swedish krona and the South Korean won, according to the International Monetary Fund.

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Story by Zahra Tayeb 1/29/2023    Redacted shorter to keep to important points and bullet points added by HGG. https://markets.businessinsider.com/news/currencies/dollar-dominance-russia-china-india-brazil-oil-trade-reserve-currency-2023-1

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  • Russia and Iran are working together to launch a cryptocurrency backed by gold, Vedmosti reported.
  • The stablecoin could replace the US dollar for payments if Russia legalizes crypto in crossborder trade.
  • A "de-dollarization" trend has already begun as the greenback's dominance makes purchases more expensive.

Russia and Iran are working together to launch a cryptocurrency backed by gold, with the idea the "stablecoin" could replace the US dollar for payments in international trade.

The two sanction-hit countries want to issue a "token of the Persian region" for use in cross-border transactions, Russian news agency Vedmosti reported Monday. The plan is to launch it in a special economic enclave in Astrakhan in southern Russia, which already handles Iranian shipments.

Those payments are typically done in government-issued currencies such as the US dollar, Russian ruble and Iranian rial.

But the joint project will only be able to move forward once Russia's market for digital assets is fully regulated, according to a top Moscow lawmaker. In September, the Bank of Russia accepted the need to legalize crypto for international payments to soften the impact of financial sanctions but has yet to clarify its plans.

Stablecoins are cryptocurrencies that source their value from an asset like the US dollar or gold, which are less volatile in price than digital assets. That protects investors against wild swings in the wider crypto market.

In recent months, Russia and Iran have accelerated their push to "de-dollarize" — to move away from using the greenback in commerce — think tank the Jamestown Foundation has said. They aim to increase their volume of trade to $10 billion per year via moves such as developing an alternative international payments system to SWIFT, which they are banned from.

The US dollar remains dominant as the top currency for trade and foreign reserves, even though it soared over 12% in 2022, fueled by Federal Reserve interest rate rises. But a trend toward de-dollarization has begun, analysts say, as that appreciation makes trade more expensive for buyers holding less robust currencies and as countries seek to move away from US exposure.

China, for another, has started to push for the yuan to replace the dollar in oil deals, given its increased trade with Russia after it invaded Ukraine. The rise of the so-called petroyuan could spread its influence across Asia for crude transactions.

Meanwhile, Russia and China have joined forces on another de-dollarization project. In June, President Vladimir Putin said Russia was looking to develop a new reserve currency with other BRICS nations.

Story by Zahra Tayeb 1/17/2023  Redacted shorter to keep to important points and bullet points added by HGG https://markets.businessinsider.com/news/currencies/dollar-dominance-russia-iran-gold-backed-stablecoin-crypto-2023-1?utm_medium=ingest&utm_source=markets

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Stagflation is Now the Consensus Expectation of Asset Managers for 2023

“Bridgewater Associates is the world’s largest hedge fund. Bridgewater’s chief investment strategist, Rebecca Patterson, is another of the voices saying that stagflation will be the economy’s base case through at least the near term. That’s not all she’s been saying, however. Patterson also has been vocal in her opinion that one of the best ways to diminish the impact of stagflation is with gold. (In economics, stagflation or recession- inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high.)

As Patterson and her team started to consider the likelihood that stagflation could prevail for the foreseeable future, they researched which assets were the most beneficial in economic circumstances characterized by low growth and higher inflation. Going back 100 years. in their examination, Bridgewater determined that gold has been a particularly “solid” asset (pun intended) throughout periods of stagflation.[2]

It’s valuable information, to be sure. But even if we didn’t have it, we still would have the historical record of gold’s performance during what is perhaps the most infamous period of stagflation in American economic history.

From 1973 through 1982, inflation proved to be a tremendous challenge, rising to double digits on multiple occasions while never dropping much below 6%.[3] The country fell into recession three separate times in those years.[4] And monthly unemployment climbed as high as 11% and never dropped below 4.6%.[5]

During that tumultuous stretch, gold strengthened considerably, appreciating nearly 600%. As a matter of fact, silver acquitted itself very nicely, as well, rising 435%.[6]

Let me be clear: Gold may or may not be an appropriate choice for you as a way to try to hedge your savings against a potential stagflationary environment. Only you can decide that for yourself. But given stagflation’s capacity to significantly impede the growth of IRAs and 401(k)s for years at a time – as well as the likelihood we’ll see stagflation reappear in 2023 – I’m hoping you’ll seriously consider a meaningful strategy of some kind that’s designed to lessen its impact.”

Sited from & Credited info: APM posted 12/2/2022 Redacted shorter to keep to important points and bullet points added by HGG.  https://www.augustapreciousmetals.com/market-news/stagflation-is-now-the-consensus

[2] Jennifer Ablan, Pensions & Investments, “Bridgewater’s Rebecca Patterson: Fed risks credibility in inflation fight” (August 25, 2022, accessed 12/1/22). [3] U.S. Inflation Calculator, “Historical Inflation Rates: 1914-2022” (accessed 12/1/22).
[4] National Bureau of Economic Research, “US Business Cycle Expansions and Contractions” (accessed 12/1/22).
[5] Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey” (accessed 12/1/22).Sited from & Credited info:
[6] London Bullion Market Association, “Precious Metal Prices” (accessed 12/1/22).

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Russian puts the ruble on the gold standard. This move to encourage domestic gold inflows to the Russian Central Bank. How Russia has weaponized its gas trade with Europe to strengthen its currency? Russia to declare the ruble as a substitute for Gold.
  • Russian puts the ruble on the gold standard.
  • This move to encourage domestic gold inflows to the Russian Central Bank.
  • How Russia has weaponized its gas trade with Europe to strengthen its currency?
  • Russia to declare the ruble as a substitute for Gold.

Trump said that Putin is a really smart leader. Well, he said this for a reason! Even before invading Ukraine, Putin had prepared himself to deal with the imminent sanctions. But it was the dumb leaders of the West who couldn’t match Putin’s shrewdness. Biden imposed, what he termed as “crippling” sanctions on Moscow and excitingly waited for the Russian economy to “blow up.”

But much to Biden’s chagrin, that delusion never saw the light of the day. Now, consider Russia’s steps to shore up its currency—the Ruble. Russia, with three major steps, has effectively recovered the lost valuation of its currency. And now market experts say that the Russian Ruble is now more stable than the US dollar!

Russian puts the ruble on the gold standard

Recently, the Russian central bank announced that it will put the ruble on a gold standard. The bank pegged 1 gram of gold to 5,000 rubles. Now that means, one troy ounce of gold or 32 grams of Gold would now cost 1,60,000 rubles in Russia. At the current exchange rate, 32 grams of gold would cost roughly $1,600 in Russia.

But wait, in the US, the same quantity of gold would cost you $1,928. That means Russia has effectively ratcheted up its currency’s value against the dollar by pegging it to gold. If, 1 gram of gold is bound to 5000 rubles, then according to Western standards, the ruble must be valued at 70-75 units against 1 dollar.

Recently, the Russian central bank announced that it will put the ruble on a gold standard. The bank pegged 1 gram of gold to 5,000 rubles. Now that means, one troy ounce of gold or 32 grams of Gold would now cost 1,60,000 rubles in Russia. At the current exchange rate, 32 grams of gold would cost roughly $1,600 in Russia.

But wait, in the US, the same quantity of gold would cost you $1,928. That means Russia has effectively ratcheted up its currency’s value against the dollar by pegging it to gold. If, 1 gram of gold is bound to 5000 rubles, then according to Western standards, the ruble must be valued at 70-75 units against 1 dollar.

This move to encourage domestic gold inflows to the Russian Central Bank

Since the West has banned Russian gold under sanctions, Russian banks would be more than happy to sell whatever gold they possess to the Russian central bank. They will sell even on discounts since they can’t find buyers in the West due to sanctions. More domestic gold flows to the Central bank would mean the ruble will get stronger with each passing day.

How Russia has weaponized its gas trade with Europe to strengthen its currency?

Russia has asked “unfriendly” nations to pay in gold or the ruble for their gas trade with Russia. That would encourage international gold flows to the Russian bank. European countries would either have to buy rubles using gold or simply trade through gold. In both ways, the EU will end up helping Russia deepen its gold reserve. That would mean that ruble’s value would get even more strengthened.

Russia to declare the ruble as a substitute for Gold

Now, under the third step, Russia will simply put its currency on the gold standard. It can simply declare the Ruble a hard gold substitute at a fixed exchange rate. Now, when a currency is backed by gold rather than the US dollar, it becomes more stable and stronger. With a strong ruble backed by gold, Russia would simply be in a position to insist on payment for Russian commodities in rubles. So, each time any European country pays Russia in the ruble or gold, it will simply end up strengthening the ruble’s position even more.

They had thought that by devaluing Russian gold and by sanctioning it, they would reduce the amount of stuff Russia could buy using that gold. Instead, the ruble’s binding with gold and ensuing decision of forcing EU nations to pay in ruble or gold for their gas trade with Russia have simply turned the table on the West.

Story by Vikrant Thardak March 31, 2022:  Redacted shorter to keep to important points and bullet points added by HGG https://tfiglobalnews.com/2022/03/31/by-pegging-gold-to-the-ruble-russia-has-just-wiped-out-the-dollars-clout-from-the-world-markets/

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