The Economic Shocks are Just Beginning

Western sanctions are crushing the Russian economy, yet Putin has little option but to double down, sending shockwaves throughout the global economy.

Key Takeaways:

  • Gold jumped above $2,000/oz before dropping back to $1,980/oz, providing a stellar buying opportunity.
  • Oil, natural gas, wheat, and corn are all key ingredients in our everyday life. Unfortunately, they come directly from Ukraine and Russia.
  • You can’t fight inflation, but you can own assets that benefit from it. Tangible assets absorb inflation and preserve your purchasing power.
  • Flight to Gold

    The flight to gold continued this week, pushing the price within $2 of its all-time high. This week’s trade value inside of Vaulted has almost doubled the previous record. Investors see inflation on the horizon and want to own something tangible.

    Gold touched all-time high

    The recent drop is providing a fantastic buying opportunity for those looking to enter the gold market. The Relative Strength Index (purple line on the chart) measures price momentum. According to RSI, gold is now trading at a more reasonable level than two days ago.

    Russia, to Rubble

    Since the fall of the Soviet Union in 1991, Russia has worked diligently to build trade partnerships with Western economies. This global trade has stimulated growth, suppressed inflation, and increased access to vital resources across the globe.

    In a matter of days, the West unraveled three decades of economic integration. Now, Russia is facing the worst crisis since the fall of the Soviet Union. Russian citizens face a plummeting currency, a mass exodus of foreign investment, and a complete obliteration of living standards. In his quest to reduce Ukraine to rubble, Putin is taking a bulldozer to his own house.

    Unfortunately, the damage goes both ways. In the modern economy, every nation relies on others for raw materials, labor, energy, commodities, agriculture, or some combination thereof. One straw can set off a chain reaction of camel’s back-breaking the world over.

    That straw is Ukraine.

    Chain Reactions

    More specifically, the straws involved in breaking the “camel’s back” are wheat, corn, natural gas, aluminum, and of course, oil.

    Ukraine produces 13% of the world’s corn. Corn has a wide variety of applications, including gasoline, cosmetic products, adhesives, soap, and plastic. The “breadbasket of Europe” also produces approximately 17% of the world’s grain and 8% of the world’s wheat. Higher grain prices find their way into poultry and cattle because grain is their primary source of food.

    Russia exports large amounts of aluminum, a metal used in everything from soda cans, foil, and hard drives to vehicles, housing, and heating systems. Russia produces 11 million barrels of crude oil and 62 billion cubic feet of natural gas every day (second only to the United States in both categories). Natural gas plays a large role in fertilizers, heating systems, and manufacturing. Oil plays a large role in, well, everything.

    If it wasn’t already, inflation just became your problem. Of course, this only applies to people who use soap, stand under a roof, drive a car, heat their home, use technology, or eat food – everyone else should be just fine.

    Venezuela, Iran, and Saudi Arabia

    The Biden Administration banned imports of Russian oil this week. U.S. companies must wind down energy contracts with Russia, including petroleum, coal, and natural gas. The move stacks pressure on Putin, but simultaneously weighs on U.S. economic recovery. The United States must move quickly to build partnerships with other major producers, such as Venezuela, Iran, and Saudi Arabia.

    The United States will survive. However, as economic pressure builds, the U.S. will be forced to turn its focus away from developing nations, which rely heavily on U.S. economic and military support. Power gaps will start to form throughout the world as the U.S. turns inward. We can only hope that these gaps do not cultivate animosity for U.S. sovereignty. No matter what happens in Ukraine, this power dynamic will grow into one of Biden’s primary policy concerns in coming years.

    Absorbing Inflation

    Price increases are heavy burden, but there are ways to lessen that burden. Number one, you can just own the thing that is appreciating. You’re probably not going to buy 1,000 bushels of corn or 100 barrels of oil, but there is one commodity that works very well for this strategy: gold. Precious metals allow you to capitalize on inflation without buying a warehouse for your 5 metric tons of wheat.

    Get something tangible in your hand. Absorb some of this inflation. Your future wallet will thank you.

    Secure gold savings, without the excessive fees

    Your weekly gold market commentary comes from our internal team of researchers and technical experts. Vaulted gives modern investors access to physical gold ownership at the best cost structure in the industry. With personal advising from industry experts and access to premier precious metals strategies, Vaulted is the key to life-long financial prosperity. Start protecting your portfolio today.

    As always, thank you so much for reading – and happy investing!

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    Additional Resources:

    Kremlin tells United States to await response to “economic war” (Reuters)

    A new iron curtain descends on Russia amid its invasion of Ukraine (The Washington Post and MSN)

    Food crisis grows as spiraling prices spark export bans (Reuters)

    Investors bet on higher long-term US inflation (Financial Times)

    Time to get tougher with Russia’s Putin, Britain tells West (Reuters)