OOn Thursday, the United States clarified that any transactions with Russia’s Central Bank involving gold are a violation of existing sanctions.
“U.S. persons, including gold dealers, distributors, wholesalers, buyers, individual traders, refiners, and financial institutions, are generally prohibited from engaging in or facilitating prohibited transactions, including gold-related transactions in which blocked persons have an interest,” according to a Treasury Frequently Asked Questions statement.
Gold, however, can be an untraceable store of value. Brien Lundin, editor of Gold Newsletter, notes that “At least in small quantities, Russia could easily sell gold on the open market. In large quantities, he might as well sell the gold to China without any record of the transaction,” adding that China has demonstrated its readiness to buy gold.
Russia has about $132 billion in gold reserves, which could theoretically help fund its war with Ukraine if it finds buyers. The sanctions make it more likely that Russia will have to resort to selling oil to its allies in order to keep the war effort afloat.
Still, some are expressing concern about what might happen if Russia attempts to liquidate its gold reserves. Jeff Wright, chief investment officer at Wolfpack Capital, said Russia’s sale of a significant percentage of its gold “would signal a complete collapse of its economy and banking system – more so than the sanctions currently imposed, and a sign weakness on the part of the Russian leadership”.
During the annexation of Crimea in 2014, Russia was also sanctioned. In this case, gold prices have not budged, but BullionVaults’ Ash told MarketWatch, “this latest flurry of headlines matches the broader commodity market narrative of tighter supply. which pushes prices up.
As a safe-haven asset, gold has been doing well lately. Investors might want exposure to physical gold through the Sprott Physical Gold Trust (PHYS). Another gold exposure tactic is to invest in gold mining companies through the Sprott Gold Miners ETF (SGDM) and the ETF Sprott Junior Gold Miners (SGDJ).
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