Thread by @KennyNwankw0

The Russian #Ruble (RUB) is poised to become a dangerous global currency & here is a 🧵 explaining why.

#Thread

The Central Bank of the #RussianFederation just profoundly altered the international trade & monetary system by linking the Russian ruble to both gold (XAU) & commodities.

By offering to buy XAU from Russian banks at a fixed price of 5000RUB/gram, the Central Bank of Russia has ties the ruble to XAU. And by extension, to the dollar (XAU is traded in U$D)

Ever since Russia made the fixed price announcement, RUB has increased in value. RUB was trading at around 100 per U$D at that time, but has since strengthened & is approaching 80 per U$D.

Why, you ask? Because XAU has been trading at about $62/gram which = (5000 / 62) = approx 80.7 - Once the markets & arbitrage traders took note, the RUB/U$D exchange rate went up.

Consequently, RUB now has a floor to U$D, in terms of XAU. But in a sense, gold also has a floor. This is because 5000RUB/gram = 155,500RUB/troy ounce of XAU, & with a RUB/USD floor of about 80.7, that’s an XAU price of approx $1940.

As a result, if at any point The London Bullion Markets Association (LBMA) or The Commodity Exchange Inc (COMEX) try to drive the U$D-XAU price down (which they are known to do), they will have to weaken RUB as well or else the paper manipulations will be exposed.

Uh oh.

So, with the new XAU-RUB tie, as RUB continues to strengthen due to demand created by mandatory energy payments in RUB, this will also result in a stronger XAU price.

Implications for Natural Gas:

Russia is the world leader in #NaturalGas exports & third in oil exports. Now that Putin is requiring payment in RUB, the price of natural gas is now tied to RUB & due to RUB’s fixed link to XAU prices, Russian natural gas is now linked to Gold.

Russia hasn’t done it yet, but the exact same principles apply to a situation where Putin begins to demand Oil to be purchased in RUB.

If Russia demands XAU for oil, buyers would have to buy physical XAU, which would create issues for the paper gold markets of New York & London where the XAU pricing is based on artificial, fractionally-backed cash-settled unallocated ‘gold’ & XAU price derivatives.

Implications for GOLD (XAU)

By linking the RUB to XAU, then linking energy payments to the RUB, Putin is essentially rewriting the principles of the global trade system while permanently altering the global monetary system.

Implications for U$D:

For half a century, U$D has been propped up by the #PetroDollar (Crude Oil Revenue denominated in U$D) - USA & The Saud Dynasty made a deal to standardize oil prices in U$D in return for USA helping them stay in power🙃

What we are witnessing currently is the beginning of the end of that system & the advent of a new gold & commodity backed multi-lateral monetary system.

What triggered this? Yup, the freezing of Russia’s foreign exchange reserves.

The commodity strong nations of the world, especially the oil exporting nations have been discussing such an event for years.

There are a lot of moving parts, but one guarantee - U$D will come out of this diminished & less important than we’ve been accustomed to.

Implications for Russian Rubles (RUB):

Linking RUB to XAU has placed a floor under the RUB-U$D rate, thereby strengthening RUB. Demanding that natural gas exports are paid for in rubles (and possibly oil down the line) will serve to stabilize & support RUB

If even just half of the international trading system begins accepting RUB for commodity payments arrangements, this would render RUB a major global currency.

Also, any move by Russia to accept gold for oil will cause more international gold to flow into Russian reserves, which would fortify the Bank of Russia’s balance sheet aka, strengthen RUB.

Aka, Strengthen Russia.

Implications for other Global Currencies:

Central Banks around the world are obviously paying attention. The West’s freezing of the majority of Russia’s foreign exchange reserves have made on this abundantly clear: Property rights on FX reserves abroad are NOT SAFE.

And neither is foreign central bank gold held in vaults abroad.

Countries like Iran, China, UAE, Qatar, Nigeria & Angola are all paying attention. As U$D declines all of these nations will want their currencies to be beneficiaries of a new global monetary order.

Conclusion:

This move by Russia is a paradigm shift of epic proportions that I don’t think the average Westerner (are human, for that matter) is allowing themselves to realize. As the Chess Board moves, these events will reverberate in more unforeseen ways.

Increased physical gold demand. A reestablished gold price
+
Pandemonium in the paper gold markets.
+
A shift away from the #PetroDollar.
+
Increased bilateral trade in commodities among non-Western counties in currencies other than the U$D.
=Problems for USA [and the West]

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