Gold Is Being Weaponized As Part Of The Global Financial War

Russia may have started the War in Ukraine by invading on February 24, 2022, but the U.S. started the global financial war by imposing economic sanctions on Russia on February 27 and adding to the sanctions almost daily since then.

In effect, we have two wars going on at once. The first is a kinetic war on the battlefields of Ukraine, which is proceeding in a slow but steady direction in favor of Russia. The second is a financial war that is global and involves almost every major economy in the world.

In effect, financial tools such as payment channels, central bank reserves, bank messaging systems such as SWIFT, bank accounts, and import/export traffic have all been weaponized in an effort to destroy Russia. Unfortunately for the U.S. and its allies, almost all of the sanctions have been poorly thought out and are doing more damage to the U.S. than they are to Russia.

High energy prices have enriched Putin and hurt Western consumers who have to pay more at the pump and have less to spend on everything else. Food shortages due to the cut-off of Russian and Ukrainian grain exports have caused food prices to spike now and will cause mass starvation by this fall.

Given the extent of financial warfare being aimed at Russia, it comes as no surprise that Russia is fighting back financially as well as on the battlefield. Russia had reduced the amount of natural gas flowing to Poland and Finland and may reduce gas supplies to Germany and others as the cold weather approaches in a few months. And, as reported here, Russia has mobilized its sovereign wealth fund (the State Fund of Russia or “Gosfund”), to set up a special reserve of gold and other precious metals.

This is more than just an economic move. As explained in the article, Russia considers this fund mobilization of state resources in the conduct of a war.

Experts understand the term “mobilization” as referring to calling up troops, moving weapons and supplies into position, and otherwise preparing for either offensive or defensive war. By issuing this mobilization order with respect to Gosfund and gold, Russia is saying that gold will be as much a part of its military strategy as artillery, drones, tanks, and other key weapons systems.

There’s nothing unusual about this move. At the outset of World War I, all of the major belligerents banned gold exports, stopped the convertibility of bank notes into gold, and sold overseas assets in return for gold. The selling pressure was so great that the New York Stock Exchange was actually closed for five months from August to December 1914. (Stock trading continued outside on the street in what became known as the “curb exchange.”

Sellers had to bring stock certificates and buyers had to bring cash, but the show went on until the NYSE was reopened). Gold shipments were also prohibited at the beginning of World War II and did not resume until the new Bretton Woods system was created in 1944 and launched after the Allied victory in 1945.

Gold has always been a crucial factor in fighting major wars. The War in Ukraine has morphed into a new world war once the global sanctions regimes are taken into account. Gold is once again on the front lines as a weapon of choice.

As other countries decide to increase their gold reserves and restrict their gold exports, one can expect the price of gold to soar. Unlike 1914 and 1939, there is no gold standard to lock in the price of gold.

There’s no limit on how high the price can go as the opposing nations stock up on guns, ammo … and gold.

Corporate leaders and institutional fiduciaries looking to incorporate state of the art predictive analytics to their risk mitigation and strategic analysis should click the link to learn more about Raven Predictive Analytics®.