Leeb:  “The relationship between Russia and Europe strikes me as curious. Everybody knows the Europeans have levied sanctions against Russia. Interestingly we haven’t heard to much about those sanctions recently. And this is the backdrop as Russia continues to move troops and tanks in the area near Ukraine....

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“Of course Russia is also facing sanctions by the United States. And some of these sanctions have hurt Russia. But since March, as the Ukraine crisis was in full swing, the Russian ruble has risen against the euro. So it strikes me that these sanctions may be doing Europe more harm than Russia.

Now the only sanctions that Russia has issued so far have embargoed food imports from the European Union. Also, the Baltic States continue to suffer, and France is in the midst of a government revolt. The French economy is in shambles. If you look elsewhere in Europe, it’s hard to find growth anywhere. Even Germany is struggling.

At the same time, we have the Russians making their largest gold purchases in the past few years. It is interesting to see the Russians buying gold instead of worrying about protecting their currency. So far their strategy of adding gold reserves seems to be working. They even announced that they are going to let the ruble float.

This just shows me that the Russians are very confident about their monetary situation.  Some might wonder: What makes the Russians that sure about what they are doing? I can see only one answer --  China. China has $4 trillion of reserves. This means the Chinese can support the ruble without blinking an eye.

And obviously the Russians buying gold is another indication that the Chinese have a major bid under the gold market. The Chinese have told the Russians, ‘You are going to be OK buying gold here because we have put a floor under the market.’ The Chinese are working closely with the Russians because they need their resources and the cooperation of the Russian military.  So China wants Russia to be in a strong position and that is why China has advised Russia to buy gold. 

This doesn’t mean that gold is immediately going to move up to $2,000, but it’s the strongest indication we’ve had that the Chinese have a major bid in the gold market. This says to me that we have ridden out the worst of this pullback in gold.

These are certainly not the conditions that Goldman Sachs thought we would see in the gold market. So, yes, there is a ‘Chinese put’ in the gold market that will prevent us from seeing much more downside in gold. But when I look at the long term, between five and 10 years, I see the price of gold 10 to 15 times higher.

Gold is going to be part of the new monetary system. There is no doubt about that.  This will involve a basket of currencies, including gold. So we are living in exciting times, and we are seeing this transition unfold. This is why the countries in the East, including Russia and China, are accumulating so much physical gold. They know what is coming.”

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