Sanctions Usher In New Era for Gold

Jodi Stanton, CEO of Rush Gold presents the latest commentary on the effects of the geopolitical events, and Australia’s strong positioning to benefit from the renewed focus on the historically strong asset.

Australia has a chance to become a superpower in the new commodity currency order that has emerged with the imposition of Western sanctions on Russia.

Sanctions imposed on Russia for its military action in the Ukraine froze about $US 300 billion of Russia’s $US 640 billion gold and foreign exchange reserves. Such restrictions show that these assets – barring gold – are someone else’s liability. Someone can simply decide they are worth nothing.

“These currency sanctions are unprecedented because they have never been tried before on such a major scale. Even during World War II, the US and its allies allowed the Bank of International Settlements to continue to process transactions from the banks in Nazi Germany.”

“Since 1971, when US President Nixon severed the last connection between the dollar and gold, this world monetary order has been based primarily on the expansion of debt, and not primarily on resources or on industrial dominance.”

“However, bank currencies with connection to commodities have strengthened over the past year. For instance, the Chinese yuan increased by 11 per cent, Mexican peso by 9.7 per cent, the Brazilian real by 21 per cent and the South African rand by 11 per cent.  That even these less prominent currencies are rising shows that resource backing for currencies is an idea whose time has come.”

“As a major global commodity producer, Australia is in a strong position to benefit from the renewed global focus on commodities, especially if we focus on balance sheet repair instead of further expansion of our national debt, which has doubled over the last three years.”