New Financial Order - The Case for Precious Metals
So much has happened in the last couple of weeks that I thought it reasonable to digest what has recently occurred and take some time to explain things more thoroughly. While changes like what we have been seeing have been in the works for a long time, no one knew for sure what the catalyst might be, nor exactly when it would be triggered. Like the last snowflake that falls on an unstable hillside before an avalanche occurs, it is sometimes impossible to identify that snowflake until after the avalanche has begun. It appears now that the avalanche has begun, and the last snowflake appears to be the confiscation and sanctioning of Russian Central Bank reserves. Many forces have been bringing instability to the existing world financial order for many years. Precious metals owners are beneficiaries of the new financial order developing now.
Signposts - Basel III
There have been other signposts along the way we have written about, such as the Basel III international banking regulation changes. Even those who have profited the most from the fiat-controlled monetary order knew that it could not go on forever and had begun to make plans for an eventual return to a tangible-resource-based financial reserve and trading system to emerge. But these rule changes were being slowly implemented, with extensions and exceptions granted before full implementation was ever achieved. It was as if they didn’t want to cook the goose laying the golden eggs. But what recently occurred has somewhat nullified the ability of central banks to indefinitely continue to manipulate the world with fiat currency creation or manipulate gold and silver prices with paper-gold pricing mechanisms.
Petro-Dollars to Golden-Rubles
In his announcement less than two weeks ago, the Russian President announced that Western sanctions against Russia meant that they could not use the Dollars or Euros they received from oil or natural gas purchases. This made these currencies dead assets to Russia that they couldn’t spend on necessary items their national economy needed to survive. He said the effect would be the same if they sold their gas and oil for free and that these terms were unacceptable to Russia. Working with leaders from the Russian Central Bank, he then presented a plan whereby Russian gas could only be purchased with Russian Rubles or gold if the purchaser as part of a Western cohort of nations sanctioned Russia. Similar to how the petro-dollar pegged the value of the dollar to oil, Russia pegged the Ruble to gold at a current rate of 5000 rubles per gram of gold.
This linkage between gold and rubles helped accelerate the Ruble to regain value lost against the dollar because gold is still priced in dollars at the metals exchanges. Demand was immediately created for rubles and gold because they were suddenly useful for purchasing Russian natural gas. This created a three-way linkage between rubles, gold, and natural gas. Nations can exchange Dollars or Euros for obtaining Rubles at the Russian Central Bank to purchase gas. This has already begun in earnest, increasing the demand for Rubles and strengthening the Russian currency. This limits the ability of Western bankers to manipulate the gold price lower because gold is now linked to the Ruble, which is strengthened by natural gas purchases (a mandatory purchase for many across Europe).
Extended Ruble Links
Imagine what this could mean if they extend the Ruble-purchase requirement to oil, or any other commodity for that matter, such as wheat or fertilizer. Suddenly, the entire world is supporting the Ruble every time they make a purchase of something that originally came from Russia - even if they buy it from someone else, 2nd or 3rd hand. With the Ruble fixed at 5000 Rubles per gram of gold, an increase in the value of the Ruble also means an increase in the value of gold (in other currencies). With the current Dollar price per gram of gold, this is almost like gold having a new floor support price of around $1,900 per ounce. Wowza. Makes gold (and by extension) silver look much less risky to purchase compared to other assets, with current prices so close to base support levels.
April Fools (NOT)
If this system of trading continues (officially began on April 1 - but not a prank or joke), then it means the world financial order has at least become multi-polar. I believe, more importantly, that the paper-polar world (Western nations) will also become more impacted by what happens in the natural-resource-polar world (BRIC nations and others), rather than vice-versa. Instead of the tail wagging the dog (resource prices impacted by paper manipulation schemes), the resource dog will begin to wag the paper tail. That is, prices for resources, including energy, gold, silver and other precious metals, along with agricultural commodities, will become more related to demand and supply of said resources, and less susceptible to price manipulation by those trading paper derivatives of those assets.
American Way of Life (?)
What does all this mean for the average American? It means be prepared to pay higher Dollar prices for real goods which are in demand worldwide, regardless as to where in the world those goods come from. It means paper Dollars backed by the full faith and credit of a nation already $30 trillion in debt will be less desirous of holding as a financial reserve by those who need to purchase tangible assets with a currency backed by gold (Rubles). It means there will be an incredible demand for manufacturing facilities that were outsourced offshore 30-40 years ago to return to the United States. And it means that current prices for gold and silver are nearly as low as they will go in dollar terms. Short-term fluctuations aside, the trend is for the ability to price gold (and other resources) to move back into the hands of those that produce those resources instead of those notional trading resources on a paper exchange.
If this new resource-based trading system sticks, then those who own precious metals will be protected against the paper price increases of most all resources - also known as “inflation.” By connecting gold to other natural resources (such as natural gas) via the Ruble, it implies that increases in the price of gas in one region of the world will cause an increase in the price of gold everywhere else in the world. This impact gets magnified each time an additional natural resource (such as oil or grain) is linked to gold via the Ruble. While links of the Ruble to other resources have not been formally announced, neither was the link to gas just a couple of weeks ago. Best to be prepared by becoming an owner of precious metals soon.