Hold some gold. Better safe than sorry
Geopolitical events, particularly in Ukraine, are overtaking us as rhetoric, and sanctions, escalate. Russia believes in gold and has been buying. Should we in the West be doing so too?
Posted: Wednesday , 30 Jul 2014
London (Mineweb) -
The one sided drivel which passes for objective news reporting in the West never ceases to amaze me. On Ukraine, and in particular on the shooting down of Malaysian airlines flight MH17, the western media seem to promote one agenda, and one agenda only, without any recognition at all that there might be an alternative argument viewed from the ‘other side’. Now whether it is proven that the anti-Russian rhetoric thus encompassed is correct or not surely a wholly impartial news organisation should at least recognise that there could perhaps be another side to the story. The whole affair smacks of the Weapons of Mass Destruction accusations against Iraq – the pretext which led to the Iraq War and which spawned so much killing of members of the armed forces, local police and huge numbers of civilians and has indirectly led to the far more worrying – to the West – takeover of large swathes of Iraq and Syria by ISIS. Perhaps the West should learn not interfere in other countries, however despicable their regimes may appear to be, without understanding the unintended consequences of so doing which are often – indeed usually it would seem – far worse for the local populace than the existing status quo.
On the shooting down of MH17 there have been all kinds of assumptions and accusations made without any detailed examination of the actual facts. One cannot see any logic at all in the accusation that Russia brought down the airliner. There could be a slight logic in Ukraine doing so in an attempt to put the blame on the separatists and polarise opinion given that it was Ukrainian air traffic control that sent the airliner on its fateful routing. The most likely scenario does indeed seem to be that the separatists did bring it down in error mistaking it for a Ukrainian military transport – although why that might be flying at 32,000 feet only a few miles from the Russian border seems a little strange. We need an impartial investigation to find out what actually happened but with so many parties involved, mostly with their own distinct political agendas, will we ever find out the real truth? Only what is fed to us by the various propaganda machines employed by the West and Russia as supposedly independent news media.
There does seem to be an agenda in the West to demonise Russia for opposing the so-called ‘popular uprising’ in Ukraine, which the Russians firmly believe (and I don’t think there’s any doubt about this as a strongly-held belief) that the ‘uprising’ was sponsored by the West, and the U.S. in particular, for the installation of a Western-friendly administration, and ultimately the expansion of NATO, towards yet another Russian border. Not surprisingly Russia views this as a serious military threat and feels it has given enough ground – probably too much ground in fact.
None of this seems to be even mentioned in western media reporting of the geopolitics involved. The Great Game as some would call it. This seems all very well to the bullying superpowers when interfering in nations which don’t have the kind of clout to offer serious military resistance, but perhaps twisting the tail of the Russian bear in this manner starts to become seriously worrying in terms of potential NATO-Russian military confrontation towards which we seem to being driven by U.S. policy (primarily).
Meanwhile the West is stoking up financial sanctions against Russia despite these being potentially seriously destabilising for a number of fragile Western banks – in particular in France, Italy and the USA – which are heavily exposed to Russian financial institutions. And if Russia responds by cutting off oil and gas to Ukraine and much of Europe this could prompt another ‘dark age’ in the nations affected as power supplies are totally inadequate without the Russian fuel supplies.
As we have mentioned before we cannot see how this has had virtually no effect on the gold price given the latter’s usual stimulation by serious geopolitical conflict – and this particular ‘coflict’ could become very serious indeed if the rhetoric from the U.S. and its European allies talks us into a corner from which there may be no return. One suspects there is little doubt that Russia has been helping the separatists in Ukraine, but then how often has the U.S. intervened in countries where it has felt its interests are threatened too? And regarding the shooting down of MH17 it was not too long ago that the U.S. shot down an Iranian civilian airliner killing nearly as many civilians, including children – an act for which the then U.S. President refused to apologise.
Coming back to gold, Russia has been purchasing gold strongly in recent months. It purchased some 18.6 tonnes in June alone. It looks to be preparing itself for a period of financial attacks and sees gold as the best insurance against this. The West tends to see the effect of ever increasing sanctions on Russia as having the same kind of impact they would if they were applied to a Western nation, but this is not necessarily the case. The Russians have a history of surviving serious financial hardships and anything the West throws at it in terms of sanctions just won’t anywhere near compare to those hardships still in recent memory – particularly when it has allies like China and most of the CIS states to help it out in trade terms.
If the West escalates sanctions further, at some stage Russia’s President Putin will undoubtedly come up with serious retaliation. He has a strong-man image to live up to domestically and a desire for Russia to consolidate its place as one of the global superpowers. From the Russian viewpoint it has given in too much to the West in recent years. As we mentioned in a previous article, Ukraine is, in effect, Russia’s Cuba. The point at which the bear cannot afford to be faced down and is likely to resist strongly either covertly, as it seems to be doing at present, or overtly if it feels it has little more to lose. It has been quite restrained so far, but cutting off gas supplies to the Ukraine, and thus to much of Europe, which relies on the same pipeline system, would rapidly bring the former to its knees and bring serious hardship to many Eurozone members. This gas supply cannot be quickly replaced from other sources if at all – indeed the fear of Russia cutting off supplies is why the sanctions to date have been pretty limited – but if they are taken to the next stage .....!
Russia obviously believes in gold – as seemingly does China, the other modern day superpower. Does the West believe in it any longer? It’s hard to tell. On the face of things no. But who knows what is said behind closed doors except those directly involved – and they aren’t saying. Thus it is still perhaps a good idea to hedge one’s bets and hold some gold against yet another global financial crisis precipitated by tit for tat sanctions. Particularlywhen one is aware that today’s fiat currencies have virtually no backing at all and could revert to the value of the paper on which they are printed. Let’s hope it doesn’t happen, but it may be better to be safe than sorry.