G-7 Sanctions Russian Gold
The G-7 will ban Russian imports of gold in retaliation to Moscow’s war against Ukraine. The Group of Seven (G-7) is an inter-governmental political forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. In addition, the European Union is a ‘non-enumerated member’. When Russia joined in 1997, it became the G-8. But Russia was suspended from the group in 2014 after annexing Crimea.
Russia is the world’s second-largest producer of gold. They create 10% of the globe’s total output. Russian gold holdings have tripled since annexing Crimea. The central Russian bank relies heavily on gold to stabilize their economy.1
Gold has been Russia’s biggest export after energy. Their gold exports totaled almost $19 billion. About 90% of Russia gold was exported to G-7 countries. And 90% of that was exported to the London Bullion Market Association (LBMA). The LBMA had already banned six Russian refineries. The U.S. imported less than $200 million worth of gold from Russia in 2019. That number dropped to under $1 million in 2020 and 2021.2
Russian gold could find a home in China and India. Those two countries have the largest demand for gold and are not bound by the G-7 agreement.
The ban has been deemed as symbolic. However, the drop in physical metal could cause issues in the ‘paper’ gold market. Global conflict and market volatility are increasing demand for physical gold. There may not be enough available to cover paper gold securities.
PDAC Conference Forecasts Higher Gold Prices
The state of the global gold market was front and center at the recent Prospectors & Developers Association of Canada (PDAC) conference. The overall takeaway was that the demand and price of physical gold can be counted on to continue rising. Some specific highlights include:
Peter Marrone, Executive Chairman of Yamana Gold Inc., stated recession and stagflation are creating a “perfect storm” for gold prices to rise. Marrone suggested that high inflation, a looming recession, and war in Ukraine, are parallel to conditions in 1980. “In the context of what was happening in 1980, gold’s price went to around $840 per ounce,” he said. “In terms of adjusted dollars, what does $840 mean today? That number is roughly $2,700-$2,800. And I certainly think that there is an excellent opportunity for gold’s price to go up to those levels again.”3
Peter Krauth, author of “The Great Silver Bull”, also predicted gold to reach record heights. He foresees gold hitting $5,000. Krauth said, “The odds of gold reaching $5,000 are based on the rise in inflation and the growth in the money supply. And the odds are that inflation and money supply growth will be significantly higher than what we’ve been experiencing over the past 10 to 15 years.” He added that his $5,000 forecast was echoed by Scott Minerd of Guggenheim Partners and the In Gold We Trust Report. 4
Another conference takeaway comes from John Kaiser, founder of Kaiser Research Online. He stated that gold will rise as the U.S. dollar loses its status as the world’s reserve currency. China and Russia are forming an economic alliance. “The US dollar will not be used within the China-Russia axis,” said Kaiser. “They’re going to fracture the hegemony of the US dollar. It’s not an overnight thing, it’s not black and white. It’s going to be a transitional thing. And I think that’s where the real price of gold will flourish.”5
Kaiser continued that global conflict would push up the price of gold. He explained that gold is an “insurance policy” for when “chaos breaks out.”
War, inflation and recession are now the rule of the day. As result, gold is revealing its vital role in the world economy. The expert consensus is that gold prices will continue to rise hand in hand with global instability and uncertainty. Now is an opportune time to take advantage of the benefits offered by a Gold IRA. Contact American Hartford Gold to learn more.