Hey There Income Hunter,

 

This spring, when US sanctions were placed on Russia and its foreign reserves were frozen, Vladimir Putin came up with a brilliant plan …

 

The Russian strongman offered all friendly trading partners the ability to exchange 5,000 rubles for one gram of gold.

 

OK. So what?

 

You see, while Putin wasn’t pegging the ruble to gold, he realized that his oil was in such demand that buyers would consider exchanging gold for rubles to pay for his Tomsk Tea. 

 

In the weeks following sanction implementation, the ruble got crushed, with the exchange rate doubling from 60-to-1 versus the US dollar to 120-to-1.

 

So, initially Putin’s deal was the equivalent of buying 5,000 rubles for $1,200 of gold. That’s a  pretty nice discount – and, boy, did it work.

 

Today, I’ll dive deeper into how this has strengthened Putin’s hand and where it may lead next.

 

The USD/RUB Exchange Rate

 

Let’s take a look at how this jas worked out for Putin. Here is the foreign exchange rate chart for the USD/RUB …

 

 

Can you believe how bad the sanctions backfired??

 

Check this out …

 

If you calculate where gold would be today if Putin actually backed the ruble with gold you get around $2,500 an ounce. 

 

Well, guess what? Russia may be the only country able to back 100% of the Russian ruble with gold. 

 

Now, I have said for the past year that a new monetary system may include some type of gold backing … 

 

However, I never thought Putin would be able to insert himself into the mix. 

 

Below is a table illustrating where the price of gold would have to go for each country’s monetary aggregates were 100% backed by the gold. There is a very good chance Russia and China own a significant amount more than publicly stated.

 

 

You simply multiply the amount of gold by its price that will equal the aggregate amount of the currency in circulation. 

 

Notice how Russia is the only one in the ballpark of gold’s current price? And do you know why? 

 

Russia’s debt-to-GDP is only 17%. How does that compare to 250% for Japan and 125% for the US??

 

You would think that all the analysts sitting at the Fed would have figured this out and realized the sanctions would be a really bad idea. 

 

Bring It Home

 

Gold and silver will play a massive role in the new global monetary system (it’s coming!) and silver will also play a major role in the new green energy revolution.

 

On top of this, the paper gold and silver markets are no longer overbought, so now is an ideal time to purchase the metals and consider buying some miners as well.

 

Check out these tickers for my top picks in the sector:

 

• PSLV
• PHYS
• GDX
• SILJ
• GOLD
• RGLD
• WPM

 

By the way, Licia Leslie, Option Pit’s technical expert who specializes in reversal patterns using candlestick analysis frequently sends alerts in the metals space. 

 

Licia will be presenting live, along with Mark Sebastian, this Thursday at 7 p.m. I’m certain you will find it incredibly insightful and valuable for your trading. Click here to register.

 

In the meantime, remember …

 

When the Fed is forced to end its tightening cycle due to a failing economy, metals and commodities will soar. We are within a few months of this event so get involved and as always …

 

Live and Trade With Passion My Friend,

Griff