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Russia Dumps Dollars for Gold | USMR Market Insights

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May 31, 2019

Russia is aggressively dumping billions of U.S. dollars and instead is increasing its share of euro and Chinese yuan. This could prove particularly dangerous over the long run, especially if other countries follow suit. The country has also ramped up its gold purchases to become the world’s biggest gold buyer of the last decade. Is this just an example of simple diversification or is Russia attempting to undermine the dollar’s status as the world’s reserve currency? Learn more in this episode of USMR Market Insights with Patrick Brunson.

Russia Dumps Dollars for Gold – Video Transcription

Patrick Brunson: 00:00  

One of the biggest issues that started to surface over the course of the last few weeks is a term called de-dollarization. This is a term used by analysts who are watching several countries like Russia who are literally dumping US dollars and dollar denominated assets. Many countries have been doing this over the course of the last couple of years, but it hasn't caught much attention until the last couple of months. This is because Russia has literally dumped over $80 billion worth of U.S. Treasury bonds over the last two months. That's almost their entire holdings in U.S. treasuries combined. With that said, if Russia's dumping treasuries to the tune of billions, two questions come to mind. One, why are they doing this? And two, what are they buying in place of these assets? For one, we don't know 100% as to why Russia is dumping treasuries. Nobody does because they haven't made a public statement, but anyone can assume that it's probably because it has a lot to do with the repetition of sanctions being placed on Russia by the Trump administration.

Patrick Brunson: 01:01  

It could also be a result of the trade war with China and how much it affects Russian trade as well. The other one is it could also be the constant pressure that the U.S. has been putting on the Venezuelan leader, who's an ally of Russia. Either way, it's got Russia de-dollarizing and that is not good for the dollar or the U.S. economy in the long term. This could get considerably worse should other countries start to adapt the same philosophy. This isn't a good thing for us because over the last decade we've seen the percentage of countries that use U.S. dollars on global trade go from around 80% of the world down to less than 60%. So this is where the next question comes into play. What are they buying in place of the U.S. assets? According to the IMF and the World Gold Council, Russia has been dumping treasuries and exchanging them for Chinese yuan, but the other asset that they're starting to hoard is one that many have held since the beginning of human civilization, gold.

Patrick Brunson: 02:00  

Gold has always been the last man standing during times of currency manipulation and trade wars. It's the foundation of money, and it has been for centuries. It's the one asset that can be held by anyone and is recognized internationally as real money, regardless of the relationships between different countries. Not only that, but gold is the one asset or currency that increases in value whenever paper currencies like the dollar plummet, and if we start to see a new trend of countries dumping dollars to buy the yuan and gold, it will have a huge impact on the dollar as well as the entire global economy.

Patrick Brunson: 02:36      

With that said, if you'd like to get more information on this topic, you can pick up U.S. Money Reserve's latest report, Why This Bear Market Will Be Different: 7 Reasons Not To Ride It Out. It has a lot of really good in-depth information in regards to long-term wealth protection and the value of your dollar over time and what you can do to help protect your portfolio. So please call the number on your screen or click on the link below to get your copy today. Feel free to comment and share this video if you find the information useful. If you're watching us from YouTube, please subscribe to our channel so that you don't miss a single episode. I'm U.S. Money Reserve's Patrick Brunson, and as always, thank you for watching market insights.

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