Biden Threat To Seize Russian Assets Sends Gold To All-Time Highs

(March 5th, 2024 - Mike Maharrey)

The United States enjoys the privilege of issuing the world's reserve currency. But it increasingly uses that privilege as a hammer to shape foreign policy.

Could Americans end up feeling the blows from that hammer?

Economist and the author of Currency Wars Jim Rickards thinks that's already happening.

After gold futures closed at a record high last Friday, the intraday spot price of gold surged over $2,100 per ounce on Monday, knocking on the door of its all-time high of $2,135 set last December.

What is driving this big rally in gold?

There are many factors. Recent inflation and economic data revived hope that the Federal Reserve would cut interest rates sooner rather than later. But is likely a more fundamental factor driving gold strength as well – de-dollarization.

Jim Rickards explained it this way in a post on X (Twitter).

Last month, U.S. Treasury Secretary Janet Yellen turned heads by brazenly calling for liquidating frozen Russian assets totaling around $300 billion and using the proceeds to help rebuild war-torn Ukraine.

“It is necessary and urgent for our coalition to find a way to unlock the value of these immobilized assets to support Ukraine’s continued resistance and long-term reconstruction. I believe there is a strong international law, economic, and moral case for moving forward. This would be a decisive response to Russia’s unprecedented threat to global stability.”

Meanwhile, legislation is working its way through Congress titled the "Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act." The bill would authorize the U.S. to seize assets held by the Central Bank of Russia.

It remains unclear how many Treasury bonds and notes the Russian central bank holds.

Last November, the Russian bank released a statement claiming, "The Bank of Russia does not have U.S. treasury bonds; we do not buy these securities.” But the Treasury Department released data in September showing the Bank of Russia owns $73 million in U.S. Treasuries. Russian residents reportedly hold around $33 million in Treasury Securities.

The amount is relatively small because -- recognizing the risk of U.S. sanctions and seizures -- the Russians divested themselves of most of its dollar-denominated assets in 2018. The Russian bank sold roughly 85 percent of its Treasury holdings. At the same time, it aggressively bought gold.

Regardless of how many Treasuries the Russians still hold, repossessing them would set a major precedent, and as Rickards pointed out, the rest of the world is watching... and acting.