Russia's government could use its gold to bolster the falling ruble: ex-Deutsche bank and ex-Lehman brothers executive

Rumors last week that Russia was on the verge of selling its gold reserves were quashed with the news on Friday that it has continued to add to its holdings. 

However, John Butler, chief investment officer at Atom Capital, and Alasdair MacLeod, the head of research at online bullion exchange GoldMoney Foundation, believe that Russian President Vladimir Putin could bring the country onto some sort of "gold standard" to try to shore up its economy. 

"It was (and still is) in Russia's power to adopt a gold standard," MacLeod told CNBC via email.

"There is no doubt that Russia and China, plus the other Eurasian states in their sphere of influence are all accumulating gold and the indications are they see it as central to replacing the U.S. dollar for cross border trade."

Whether Russia would actually decide to do it was another matter, said MacLeod, and expected the country's central bank to the lack the courage to act. However, he said that if Putin is "provoked sufficiently" he may judge it to be in Russia's best interests and could overpower any reluctant officials at the bank.

Russia raised gold reserves for 8th month in Dec 2014
Russia’s monetary solution

Dec 23 (Reuters) - Russia raised its gold reserves for the eighth month in a row in November, while Ukraine reduced its bullion holdings for a second straight month, according to International Monetary Fund data released on Tuesday.

Russia, the world's fifth-largest holder of bullion reserves, raised gold holdings by 18.753 tonnes to 1,187.493 tonnes last month.

Part of the increase comes as Russia's central bank has been forced to step up buying from domestic producers hurt by Western sanctions following the Ukraine crisis, Reuters reported earlier.

http://www.reuters.com/article/2014/12/23/gold-imf-holdings-idUSL3N0U705520141223

About John Butler:

John Butler has 18 years experience in the global financial industry, having worked for European and US investment banks in London, New York and Germany.

Prior to launching the Amphora Commodities Alpha Fund he was Managing Director and Head of the Index Strategies Group at Deutsche Bank in London, where he was responsible for the development and marketing of proprietary, systematic quantitative strategies for global interest rate markets. Prior to joining DB in 2007, John was Managing Director and Head of European Interest Rate Strategy at Lehman Brothers in London, where he and his team were voted #1 in the Institutional Investor research survey.

http://www.financialsense.com/contributors/john-butler

Alasdair Macleod wrote on 28 November 2014 on his site: 

URL http://www.financeandeconomics.org/russias-monetary-solution/

'The successful remonetisation of gold by a major power such as Russia would draw attention to the fault-lines between fiat currencies issued by governments unable or unwilling to do the same and those that can follow in due course. It would be a schism in the world’s dollar-based monetary order.

Russia has made plain her overriding monetary objective: to do away with the US dollar for all her trade, an ambition she shares with China and their Asian partners. Furthermore, in the short-term the rouble’s weakness is undermining the Russian economy by forcing the Central Bank of Russia (CBR) to impose high interest rates to defend the currency and by increasing the burden of foreign currency debt. There is little doubt that one objective of NATO’s economic sanctions is to harm the Russian economy by undermining the currency, and this policy is working with the rouble having fallen 30% against the US dollar this year so far with the prospect of further falls to come.'

Ref

http://www.cnbc.com/id/102290857