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Gold Safe Haven For Russian Capital Flight
Posted May 9th, 2014
TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - Gold and silver prices remained flat on Friday with gold at $1,287.99 an ounce and silver at $19.13 an ounce, after the dollar gained support when European Central Bank (ECB) president Mario Draghi said on Thursday that the bank would take appropriate action in June to boost the economy if the updated inflation data supports such a move.
Bill O'Grady, of Confluence Investment Management, says that it may be the flight of capital out of Russia during the Ukrainian crisis that may have changed Draghi's mind. There are billions in rubles leaving Russia every day and much of that loot is ending up in European banks. “Most of that money has actually been going to Europe because apparently Russians are afraid that if they send the money into the U.S., we might just keep it,” explained O’Grady, as frozen assets usually play a large part in sanctions imposed by the U.S. “Europeans have generally not done that.”
Should that occur, O’Grady added, it would severely limit the options to where Russian capital could be safely stored. “But if they did and you’re a wealthy Russian trying to figure out where to hide your money, you’re kind of running out of places to go, and gold may be the last place left to you,” said O’Grady, particularly due to the right to own gold anonymously.
Russia's President Putin certainly knows the value of gold to one's currency, since Russia's central bank systematically built its reserves in 2013, perhaps in preparation for what has just unfolded in Crimea. But Putin's plan will also include opening the door to Chinese money through investment in Russia, particularly its natural resources like its gold, platinum, oil, you name it China needs it.
Russia is, however, planning to impose red lines around "significant" gold, platinum, and diamond mining as well as some high-technology projects, said officials.
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