Posted 25th March 2022

Tightening Sanctions on Russia to Include Gold Sees Precious Metal Gain Again

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Gold’s historic use as a source of currency has come back into focus with news of Russia trying to use its huge gold reserves to evade the sanctions imposed on them.

This has been met with the US and the UK trying to close that loophole by tightening the scope of the existing measures to include the sale of gold by Russia-backed entities. 

Russia has long viewed the US Dollar’s hegemony as the global trading currency of choice and saw gold as an ideal alternative asset as it carries no counterparty risk. However, every seller needs a buyer and the US’s actions will markedly reduce Russia’s potential pool of buyers. 

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Gold ($/g) Chart – 15 minutes – from Kinesis Exchange

While gold found renewed support on the back of these sanctions, its scope for further gains is likely to be capped by the pace that central banks are likely to raise interest rates this year.

So with the war in Ukraine providing firm support for gold, with an ever-present risk of escalation ensuring investors keep hold of the ultimate haven asset, and the spectre of raising interest rates a ceiling, gold looks set to trade in the $1,900-$2,000 an ounce for the foreseeable future.

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