Op-ed: ‘Moscow buys GOLD, increasingly independent of USD’

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Russia and China continue to buy gold to increase their reserves. Gold market specialist Dmitry Shpek explained why the two countries opt for this strategy.

Moscow and Beijing are accumulating huge reserves of physical gold by buying large quantities of precious metal. Russia’s gold reserves reached almost 2,000 tonnes. During the first six months of 2018, the Russian Central Bank bought about 106 tons of precious metal, increasing the gold share in international reserves by up to 18%.

For gold market expert Dmitry Shpek, the decision to increase gold reserves is a smart move.

“The shares of the Russian Central Bank are astute and intelligent. Moscow becomes increasingly independent of the US dollar,” he said.

The dollar continues to dominate the global financial system. However, from the point of view of the Russian Central Bank, the US currency has some weaknesses.

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“For example, money can depreciate in the aftermath of inflation. It is a sort of political statement: those who have many dollars can become a target for political blackmail, so Russia, taking into account the introduction of political anti-Russia sanctions on the part of the US and the West, has every reason to take precautions and bet on gold, ” he said, noting that contrary to the dollar, precious metal cannot be devalued.

According to the expert, Russia is betting on a stable, valuable and liquid asset whose price does not depend on the financial capacity of the debtor.

“Russia acts in a very rational way, reducing the share of dollars in its reserves and replacing them with gold. Russia is betting on the classic instrument of value maintenance in the international payments system,” Shpek said. According to him, Moscow continues to increase its gold reserves.

As for China, the country’s problem is that it bought a huge volume of US Treasury bonds, having a small share of gold in its reserves. Thus, “China runs the risk of becoming the target of blackmail.”

Russia’s interest in gold is also closely related to the plausible prospects that the world is approaching a new era of instability and a new global crisis as a result of trade wars and geopolitical issues.

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