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Russia Prefers Gold To US Paper

[heading]Russia Prefers Gold To US Paper[/heading]

The United States (US) and the European Union (EU) have threatened sanctions against Russia, but even these efforts have seemed lackluster, as namely Europe seems reluctant to step on Russia’s toes. In the meantime, Russia has made moves to tighten its relationship with emerging world superpower China, causing those two nations to move towards closer trade and sometimes trade that circumvents the US Dollar altogether.

Since the Ukraine crisis worsened this year Russia and China have worked closer together, but there are some things Russia is not interested in selling to China, and what they are might be very telling for investors.

What is off limits for Russian President Vladimir Putin as he looks for cash from China in exchange for Russian services, products, goods and property? Despite Russia looking for cash from the world’s second largest economy, China, Russia is not interested in parting with housing, infrastructure construction and natural resources.

Reports cite “red lines” around Russian gold and platinum group metals, diamond mining and high-technology projects when it comes to Russia selling Russian stuff-and-things for cash, in what’s betokening of value in the 21st century in the eyes of many nation-states.

Russia is worried about inflation. That is why it does not want to part with its resources, in particularly precious metals like gold. Although threats of western sanctions and de fact sanctions from banks like JP Morgan have led it to scramble for cash, precious metals are something Russia would rather hold onto.

What is Russia willing to sell?

There are certain things Russia has no problem selling, in particular US bonds:

In fact, not only is Russia uninterested in selling gold and interested in selling US paper, it is also purchasing lots of gold. Russia  purchased 900,000 ounces of gold worth $1.17 billion in April and it is likely this pattern has continued.

Here is a Bloomberg compilation of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:


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