Russia just made a case for owning gold — and nobody noticed
Categories: US
Here’s a strong argument for adding some gold bullion to your retirement portfolio right now, alongside those stocks and bonds.And it comes courtesy of Pavel Zavalny, the head of the Russian parliament.Zavalny spoke last week on the subject of all the economic and financial sanctions being levied against Russia following the invasion of Ukraine. Most of the coverage of his remarks implied that Russia might respond to the sanctions by switching from U.S. dollars to “bitcoin” BTCUSD, 0.30% BTCUSD, 0.30% for international trade.(As you might expect. Not only is bitcoin new, ridiculously volatile, widely open to manipulation, and a massive drain on energy in a world facing an energy crisis, but it also offers no guarantee of privacy. Western authorities can track all transactions on the blockchain, with the result, for example, that they can even get back bitcoin ransoms.) In other words, Russia is happy to accept your national currency — yuan, lira, ringgits or whatever — or rubles, or “hard currency,” and for them that no longer means U.S. dollars, it means gold.“The dollar ceases to be a means of payment for us, it has lost all interest for us,” Zavalny added, calling the greenback no better than “candy wrappers.”And this adds to the argument for having at least some gold in a long-term investment portfolio. No, not because it is guaranteed to rise, or maybe even likely to. But because it might — and might do so while everything else went nowhere, or went down. Like in a geopolitical or financial crisis where the non-western bloc decides to challenge America’s financial hegemony and ”king dollar.” Recent events show they should have bought a lot more. When Putin’s army invaded Ukraine last month, Western powers froze the foreign exchange reserves that the Russian government held in their banks’ vaults. That amounted to about $300 billion worth, or nearly half of all of Russia’s reserves, according to finance minister Anton Siluanov.According to data from the World Gold Council, the gold industry’s trade association, the world’s stock of gold is worth about $13 trillion at current prices, which is about 16 times as much as the notional value of all the world’s bitcoin. Heaven knows what would happen to the value — and the price — if it began to rival the U.S. dollar again as a reserve currency. The world’s dollars are valued at somewhere around $37 trillion. The argument is that one or two of these assets are always doing well at some point or another. The portfolio, Ramsey argues, minimizes the risk of disaster because there has never been a time when they all failed.The case for gold is often undermined by its own die-hard supporters, known as ”gold bugs.” They sometimes ascribe quasi-religious status to the metal or claim it is the only “true” currency. Actually, anything can be a currency, and if we end up in Cormac McCarthy’s “The Road” I’ll bet we find that food, toilet paper, painkillers and drugs all become widely accepted. (Bitcoin? I have my doubts.)But gold deniers go to the other extreme and argue it cannot be a currency or a sound investment at all. The current crisis shows just how wrong that is.