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Gold’s Return to the Economy

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Globally, the dollar has been used as a reserve currency by central banks. Since the 1970s, the petrodollar has been utilized for the trade of oil and energy.

Over the last two decades, elected officials in Washington have weaponized the dollar for political purposes.

In recent years, central banks have been dumping the dollar for gold.

BRICS countries have grown frustrated with the dollar’s hegemony in the global market. In 2022, Russia launched the Moscow World Standard to compete with the LBMA, citing ongoing corruption, price manipulation and enforcing trading practices rooted in nepotism and exploitation of developing countries.

The economic sanctions against Russia and the decades of sanctions against Venezuela are two examples of recent weaponization of the dollar that has raised skepticism of some trading partners outside of the European Union.

Russia, and trading partners Venezuela and Peru, account for 62% controlling stake of the world gold bullion.

Part of the western sanctions against Russia forced the LBMA to reject six of Russia’s key Good Delivery refineries from the exchange. The Moscow World Standard is positioning itself as an open alternative to the LBMA.

Many have accused the LBMA and other western countries of manipulating and suppressing the price of gold and other commodities by pushing the practice of trading in paper derivatives. The Moscow World Standard prices gold in ruble and bans the trading of paper derivatives and encourages new price discovery which could push the price of gold to over $2,500 an ounce.

Some see the rise in demand by central banks buying gold as a signal that countries that have been bullied by Western economic policies as being eager for an alternative system that will create a more equitable system and fairer monetary standard.

The Moscow World Standard was developed by the Eurasian Economic Commission, a coalition of countries that include: Armenia, Belarus, Kazakhstan, Kyrgyz Republic and the Russian Federation.

Western sanctions against Russia have led some countries to reconsider bilateral trade in non-dollar currencies for the first time in decades. China, Russia, India and Iran already have an ongoing effort to establish alternative payment and settlement systems that parallel the SWIFT banking network. Iraq has reportedly begun paying for imports in the yuan, while China has been encouraging use of it’s Cross-Border Interbank Payment System (CIPS).

China quickly became Saudi Arabia’s largest trading parter, with more than 1.76 million barrels of crude oil per day and the Shanghai Petroleum and National Gas Exchange will be enabled to handle the renminbi (RMB) for settling oil and natural gas trades which is adding to the decline of the dollar hegemony.

Long term, the BRICS+ countries are creating competition in the global marketplace for raw materials and commodities that is attempting to break the chains of the LBMA and similar price control organizations.

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Mining Industry Risks Serious Labor Shortage in Meeting Industrial Demand

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A recent report issued by Deloitte titled “Tracking the Trends 2023, the Indispensable Role of Mining and Metals” is filled with ideas on how the mining industry can align with DEI ideology and embrace the cult of climate change.

The transition to a “green energy” future requires an abundance of minerals, rare earth metals and precious metals.

International Energy Agency estimates that demand for critical metals is expected to increase ten fold by 2040 as battery and electric vehicles manufacturing increases.

The mining industry will play a critical role as the supply chain ramps up to support domestic manufacturing of batteries, electric vehicles, solar panels and other advanced energy products.

The industry faces challenges with regulators, environmental protestors and the ESG and decarbonization movements continue to force companies to adopt policies to meet diversity and inclusion quotas.

Industry leaders report that companies across the mining industry already face serious labor shortages. Activist investors and companies continue to put an emphasis on the need for diversity and inclusiveness policies that are a hamper to business efforts and growth. Many of these policies are seen as nonsensical and impractical.

A bigger threat for the industry, particularly in North America, is that many of the existing workers in the mining industry are aging. Today, the average age for a worker in the mining industry is 46 years old. With nearly 50% of the skilled engineers expected to retire within the next 10 years. 

Mining directly employs more than 834,000 in the United States. With an additional 77,000 in Canada and 400,000 in Mexico.

The mining industry in Canada faces risks to keep up with industrial and consumer demand. The Deloitte report suggests that Canadian miners need to hire 80,000 to 120,000 people between now and 2030 in order to keep up with demand.

In the United States, employment in the mining sector has fallen over 20% in the last decade due mine shutdowns resulting from the decline in global demand for coal as the ESG movement lobbied for energy policy changes to support green energy solutions and less reliance on fossil fuels.

Last year, the United States produced 170 million tons of gold. Silver production topped 1,100 tons.

Industrial demand for silver is expected to continue to surge as as companies invest in the domestic manufacturing of EV batteries, solar panels and other components of the green energy movement.

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Central Bank Gold Buying Spree Sets Records

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Demand for gold at central banks was driven mainly by China swapping dollars for gold.

Switzerland is home to some of the largest and most advanced refineries in the world. According to Swiss customs data, last year more than 524 tons of gold was bought by China.

China is the largest market for gold with a focus on jewelry and retail investment such as gold coins and bars. India is a close second.

Central banks buy gold for a variety of reasons. One is to offset inflation and act as a hedge when global financial markets are unstable. Having a sizable store of gold bullion in a central bank also provides stability for a nation’s fiat currency.

Another reason is to help offset sovereign debt accrued from government spending. Having large gold reserves provides stability in the international bond market.

Last year, central banks buying up large amounts of gold at rates not seen in decades.

China’s central bank reported significant gold purchases throughout the last year. In December, 30 tons of gold following a similarly large purchase of 32 tons in November. China’s gold reserves now reportedly to total more than 2,010 tons.

The Central Bank of Türkiye reported large increases in holdings as it struggles to reduce inflation.

Other countries around the Middle East significantly increased their gold holdings.

With Egypt adding 47 tons, Qatar with 35 tons, Iraq with 34 tons, the United Arab Emirates with 25 tons and Oman adding 2 tons.

Some see this as a push towards de-dollarization and is a signal that some countries see the political sanctions imposed by the US against Russia as weaponization of the dollar.

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Silver Mining Dominated by Mexico, China and Peru in 2022

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Preliminary data from the US Geological Survey (USGS), global silver mine output increased by 4% last year.

Total mine output globally was roughly 26,000 tons in 2022, slight more than the 25,000 tons produced the previous year.

Most of the increase was due in part to the growth of mine output in Mexico, China and Chile.

Chile is an emerging leader in mining of both precious metals and critical minerals for industry and manufacturing. The country is one of the largest producers of copper, and silver is mined as a byproduct.

Top 11 Silver Producing Countries

  1. Mexico – 6,300 tons
  2. China – 3,600 tons
  3. Peru – 3,100 tons
  4. Chile – 1,600 tons
  5. Australia – 1,400 tons
  6. Poland – 1,300 tons
  7. Bolivia – 1,300 tons
  8. Russia – 1,200 tons
  9. USA – 1,100 tons
  10. Argentina – 840 tons
  11. India – 630 tons

The USGS is anticipating an increase in global silver production for 2023 as the industry continues recovering from the pandemic.

Demand is being driven the ramp-up of advanced manufacturing of components for electric vehicles, solar panels and other electronic devices that utilize silver (Ag).

The global supply chain for raw minerals and precious metals is continuing to recover from the pandemic.

Americans continue to consume more silver worldwide than any other country. Critical metals, such as silver and lithium are necessary for the production of EV cars, batteries, solar panels and other components of the green-energy economy.

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Astroid Mining Company Prepares to Launch Demo Refinery this Spring

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While SpaceX is currently the leading company in commoditizing space travel, a new startup is preparing to launch a prototype demonstration outer space refinery.

Space mining startup AstroForge raised $13 million in seed funding last year. The company is poised to launch their first of two launches aboard a Falcon 9 rocket.

Their goal is to test their orbital refinery and scout an asteroid for mineable resources.

The demonstration unit will be filled with an “astroid-like” material that will be incinerated into gases to separate the metals.

AstroForge also intends to explore asteroids for platinum-group metals. In addition to platinum itself, the metals in the group include palladium, rhodium, iridium, ruthenium and osmium. All of these metals have many industrial uses.

Backers of the industry are enthusiastic that extra-terrestrial and asteroid mining will grow to become a trillion industry.

Gold Prices continue a bull run for the sixth consecutive week.

Gold continues week-over-week gains. The market is keeping a close eye on this week’s Fed meeting and anticipating remarks from Chairman Powell at the end.

Inflation, interest rates, the looming debt crisis and the NATO activation of tanks and other artillery support in Ukraine weighing on traders.

Other key economic data points are likely to impact markets.

Though recent data shows that inflation bay be easing, analysts from the Wall Street Journal and others share concerns from Fed regulators that tightening of the labor market in recent years may cause prices to spike.

Uprisings in Peru Impacting Copper and Silver Output

Peru is one of largest producers of copper and silver. Ongoing protests, uprisings and riots against the current government has led to the shut down of at least one mine.

Industry analysts at mining.com report the shutdown may impact up to 30% of the countries copper (Cu) production. Silver is typically found along with copper in large deposits and is mined as a byproduct.

The largest importers of Peruvian silver are Brazil and the United States. The disruptions in Peru are likely to impact copper and silver futures as global inventories have reached record low levels.

Mining Company Issues Apology for Lost Radioactive Capsule

Mining giant Rio Tinto is on the hook for accidentally losing a capsule containing radioactive element caesium 137.

The global mining company operates an Iron Ore mine in Western Australia.

The truck arrived in Perth with the capsule missing. Authorities believe that the capsule fell off the truck during the 870 mile journey through the desert to Perth.

Cesium-137 is a radioactive isotope that is used in medical and industrial equipment.

SD Bullion Launches New 5 oz Silver at Spot Price Deal

Before the pandemic, several online bullion offered regular deals to buy silver at spot price. The silver supply chain has begun to recover.

Online bullion dealer SD Bullion has launched a special promotion to buy a 5 oz silver bar at spot price for new customers.

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US Mint Struggles while Perth & the Royal Mint Shine

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Both the Perth Mint and the Royal Mint have announced huge increases in year over year sales of precious metals.

According to the Royal Mint, gold sales increased 25% above 2021, silver demand was up by 29%.

Earlier this month, the Perth Mint reported that gold sales were up 10% for the year, noting that there was a drop in demand during December.

The Perth Mint is owned by the government of Western Australia and it is reported to be the largest refiner of newly mined gold in the world.

Meanwhile, the US Mint has been struggling to keep up with demand from domestic silver investors.

Sales of Silver Eagles slumped in 2022 as demand continues to soar. This led investors to buy silver coins from Australia and England.

Why is the US Mint struggling to keep up with the demand from investors?

The US Mint outsources the production of blank silver planchets to private mints.

The Mint cancelled the commemorative 2022 Morgan & Peace silver $1 coin series due to issues with acquisition of raw materials.

The planchet manufacturers need to adhere to all legal definitions. The main one being that coins be minted from domestically mined sources.

The pandemic exposed a lot of problems with America’s supply chain. Many in the mining industry continue to worsen with inflation and looming recession.

Many of the top silver and gold mining operations in the United States all reported encountering various production delays throughout the last year.

Many of the top miners have reported delays and higher fuel costs associated with the transport of slurry concentrates from remote mine locations to refiners for further upstream processing and smelting.

The US Mint began outsourcing the production of planchets that are used to produce coins.

While the current list of suppliers is not readily available, Sunshine Minting and LeachGarner are two of the private mints that have had previous contracts with the Mint.

Most of the world’s largest and most capable precious metals processing companies are located outside the US, making it more difficult for the Mint supply chain.

Some of the ore extracted from domestic mines is handled by multinational corporations.

Many of the world’s leading refineries such as PAMP Suisse, Metalor, and Valcambi are based in Switzerland.

The Perth Mint and Royal Canadian Mint operate the largest and most advanced refineries in the world.

Why is the US Mint continuing to outsource mining and smelting operations to foreign companies?

The five largest mines in the US:

Greens Creek Mine, Alaska

The Greens Creek Mine is owned by Hecla Mining Company. The mine is located on Admiralty Island in the Alexander Archipelagos Islands, roughly 40 miles south of Juneau.

In 2021, Greens Creek produced 9.2 million ounces of silver and 48,088 ounces of gold.

Projected production outlook for 2022 is expected to be slightly higher, between 9.3 and 9.6 million ounces of silver and from 44,000 to 48,000 ounces of gold.

However, issues with the quality of the base metals, primarily zinc and lead, Hecla had postponed shipments of silver concentrates to upstream refineries.

Red Dog Mine, Alaska

Located 105 miles north of the Arctic Circle near Kotzebue, Alaska. It is one of the largest zinc mines in the world and is operated by Teck Resources (TECK).

The Red Dog Mine is believed to be the largest deposit of zinc in the world. Roughly 4% of all of the zinc is produced from this mine.

Ore concentrates of the mine are trucked over 50 miles where they are stored in port.

Due to the extreme location, the silver slurry can only be transported by ship from the arctic during the months from June through October.

The mine has been operating since 1989. With current production levels, the mine is expected to continue operating only until 2031.

The Red Dog Mine is one of the largest domestic sources of critical minerals.

Zinc has a variety of industrial uses. It is also an essential part of the green economy, component manufacturing for electric vehicle, windmills and solar panels.

Silver, germanium and lead and other minerals are byproducts of the primary operations.

Over 7.7 million ounces of silver was dug out of Red Dog mine in 2017.

Continental Mine, Montana

The Continental Mine is located near Butte, Montana. Also where the World Museum of Mining is located.

The main commodities of the Continental Mine are copper and molybdenum. Molybdenum and copper are also critical metals and minerals needed in the domestic manufacturing of electrical devices, motors for EVs and other electrical components.

Silver and gold are extracted from the copper-molybdenite ore. Recent mine output data is not  publicly available.

Marigold Mine, Nevada

The Marigold Mine is located in northern Nevada. The primary deposit is mineralized gold. The gold is extracted from sedimentary rocks including limestone, siltstone, breccias, meta-basalts and quartzite.

The mine is owned and operated by SSR Mining. The Marigold Mine began operation in 1989. The mine is expected to continue to sustain current production levels through 2032. Exploration and development of other nearby properties is expected to extend operations beyond.

Marigold is an open pit operations where blasted rocks is dumped onto heap leaching pages. A chemical process extracts precious metals and minerals from the ore and stored in carbon columns for later extraction through electrowinning.

Reports from SSR earlier in the year showed signs of delays in production with expectations of producing between 215,000 and 245,000 ounces of gold in 2022.

Rochester Mine, Nevada

The Rochester mine is an open pit, heap leach silver-gold operation in northwestern Nevada.

The silver-gold ore is extracted from sulfide deposits layered during Permian-Triassic period volcanic lava flows.

In 2021, the mining operations produced 3.2 million ounces of silver, while gold output was roughly 27,000 ounces.

Saudi Arabia experimenting with CBDC and alternative currencies to the PetroDollar

During the last year there has been a lot of media speculation regarding trade relations between Saudi Arabia and BRICS countries.

The Chinese central bank has been identified as buying roughly 300 tons of gold bullion in 2022. With Central Banks of other countries doing the same.

China has been wooing Saudi Arabia and making significant investments throughout the Middle East as part of the Belt & Road Initiative.

Saudi Arabia becoming part of BRICS and selling oil in a new basket currency would compete with both the Euro and the Dollar.

It seems pretty logical that China would intend for BRICS launch a CBDC digital currency that is backed by gold resources of the basket currency. Given that many central banks are experimenting with CBDC there will need to be interoperability between local currencies.

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Gold Price Jumps on CPI Report

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The December 2022 CPI numbers were released by the Labor Department this morning.

The latest report shows that the rate of inflation slowed slightly in December, with the index showing that overall prices increased roughly 6.5%.

The largest gains in prices were the basics of housing, food, gas and utilities.

Grocery prices continue to skyrocket with the December food numbers showing an overall increase in prices of 11.8%.

While the CPI report confirms what many analysts had expected, others are skeptical that the underlying data may not be completely accurate.

Gold futures prices rose above $1,900 before the news.

Egg prices continue to soar. The price of a dozen eggs is up by more than 64% with California leading the list with an average of $6.72 per carton.

We have also seen the premiums for silver bars and rounds dropping significantly.

Layoffs continue to hit Wall Street Banks and hedge funds. Goldman Sachs announced that they will be cutting 3,200 jobs, citing a downturn in investment and bleak economic outlook for the year.

Leading hedgefund Blackrock Advisors is cutting 500 positions with the markets facing a recession.

The tech industry lost over 150,000 jobs in 2022. This year has begun with more layoffs announced by Amazon and Salesforce, with up to 18,000 more workers facing unemployment.

Central banks are buying gold at the fastest pace in over 55 years. China’s central bank has continued its gold buying spree into December.

After record breaking sales in 2021, the US Mint face supply chain issues early in 2022.

In March 2022, the Mint announced that they would be cancelling the commemorative $1 Morgan and $1 Peace silver dollar coins. The release was anticipating by collectors and investors.

According to sales and mintage data for American Silver Eagle coins, year-over-year, the 2022 mintage was the lowest since 2019 with only 15,963,500 coins.

By comparison, more than 25 million Type 1 silver eagle coins were sold in 2021, along with almost 3 million of the Type 2.

While demand remained strong throughout the year, the US Mint struggled to keep up with order demand driving premiums to record highs.

This led to new sales records for some sovereign government mints.

The Perth Mint announced record breaking sales for 2022. Reports from the mint show that more than 23 million ounces of silver were sold, along with 1.14 million ounces of gold.

Some experts in the industry say is a better gauge of global bullion demand.

The Perth Mint produces a variety of native animal themed bullion investment coins.

The flagship is the Australia Red Kangaroo 1 oz Silver coin is typically at a much lower premium than the ASE.

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Gold Price Spikes to 6 Month High at Start of Year

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The spot gold price futures hit a six month high at the start of the year.

Rising expectations of a recession and a general decline in stocks and crypto have led to growing demand from central banks and investors.

Analysts from CNBC are anticipating precious metals price will rise, calling this year the “new secular bull market.”

Central banks bought record numbers of gold in the final quarter of 2022. Led by China reporting purchases of more than 300 tons of gold bars.

CNBC analyst Juerg Kiener, managing director and chief investment officer at Swiss Asia Capital, said last month that the current market conditions mirror those of 2001 and 2008.

“It is not going to be just 10 or 20%, I think I’m looking at a move which will really make new highs”.

Using data available from CME Group, analysts from FX Street see rising interest in the futures markets. The number of open interests in gold futures rose by more than 8k contracts for the third day in a row.

Miners are expecting bullish returns in 2023 as they expect the gold prices to catch up with inflation.

The Fed’s decision to hike interest rates higher and more frequently and in such reactionary manner despite experts predicting dire consequences.

Long time gold bug, Robert Kiyosaki is predicting that gold prices can reach $3,800 an ounce this year.

He’s also bullish on other metals, predicting that we will see silver prices will rise to $75 per ounce this year in a recent Tweet.

Dealer premiums on 1 oz gold bars have drop to as low as 2% in recent weeks.

Now is a great time for retail precious metals investors. Premiums on 100 oz silver bars have recently dropped as low as $1.49 per ounce over spot. This is similar to the premiums when shopping from online bullion dealers prior to the pandemic.

The FOMC committee is meeting. Powell’s remarks following the meeting in December indicate that the Fed is going to continue rate hikes this year, albeit at a slower pace. Today’s announcement is expected after 2:00.

Update:

The Federal Reserve Open Market Committee (FOMC) is responsible for managing the key interest rates that drive the economy.

In December the Fed announced their decision to continue the aggressive rate hikes.

The meeting minutes that were released today provide some guidance on the Fed’s plans for 2023.

The Fed is expected to continue to raise interest rates this year as it attempt to reduce the rate of inflation towards a target of 2%. Albeit with smaller incremental increases.

Recent CPI data shows that prices suggests that inflation has slows to around 7.1%, down slightly from 7.7%.

Yet, egg prices have climbed more than 49% in recent months. Some videos circulating on social media show egg prices in some NYC stores approaching $10 per dozen.

It’s expected that prices of basic essentials are expected to continue to rise as the impact of the rate hikes start to ripple across the economy.

Spot gold price held onto some earlier gains, silver prices are down slightly on the news.

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A New Global Gold Standard?

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Gold has been an instrumental component of the economy since before the American Revolution.

Our founding fathers had the forethought to include gold and silver coins in the Constitution.

A metallic standard was a central foundation for the economy in the United States based on gold and silver coins.

The US Mint was established on April 6, 1792, prior to the Declaration of Independence.

Recently, legislation has been introduced into the House of Representatives that is intended to move the United States back towards a gold-standard.

The sponsor of the bill, Representative Alex Mooney (R-WV), has stated that the purpose of the Bill is to give greater visibility of the spending by politicians in Washington.

Jerome Powell has said that gold bullion has no purpose in the US economy. The rest of the world is still remembers the Nixon Shock and other major events in the global commodities markets caused by US foreign policy.

Gold has been a core, instrumental component of the global economy, politics and international trade for thousands of years.

With the Moscow World Standard posited to compete with the LBMA, COMEX, Shanghai and other global trading markets.

* gold.org

Many speculate that Moscow is trying to position itself as an economic leader in the global economy. Earlier this year, the Moscow World Standard was announced by the Russian Finance Ministry as an open and fair competitor to the LBMA.

Moscow hopes that many of the BRICS nations and developing nations that are abundant in natural resources have opportunities to trade more fairly in global markets.

Minerals like cobalt, lithium, manganese, nickel and other rare earth minerals that are necessary for the production of batteries for electric cars, houses and other future energy needs. Silver is used in the manufacturing of solar panels and other electrical components.

All of these natural resources are also part of a national initiative to secure resources necessary to build new supply chains for the reemergence of high-tech and semi-conductor manufacturing on American soil.

An emerging Global Gold Standard built on Blockchain Auditing

Outside of the US, private gold ownership continues to grow, particularly amongst Asian markets including China and India.

Russia responded to economic sanctions by starting a program to buy gold from citizens in exchange for rubles and began requiring payment for oil, natural gas and other energy needs in Rubles as a way to stabilize the Russian economy following the invasion of Ukraine.

Bloomberg reports that at least 4 accounts in Rubles have been opened with Gazprom PJSC.

The government of Zimbabwe began to issue gold coins as currency as a way to stabilize their economy following decades of inflation due to corruption.

Many developing nations in Africa, Central and South America and Asia are rich and abundant with natural resources.

Having direct access to global markets for selling commodities such as lithium, cobalt and other minerals is of interest to leaders and businesses of many nations, some of which may be looking to renegotiate contracts with global conglomerates as a way to better leverage their local resources to rebuild their local economies following the pandemic.

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Federal Reserve Votes to Raise Key Interest Rate .75%

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As expected, the Federal Open Market Committee hiked the benchmark interest rate by 3/4 of a percentage point at the end of their two day meeting.

Ongoing failed attempts by the Biden administration and Congress to get worries about the economy and a recession out of the minds of voters leading into the mid-term elections are failing miserably as prices of everyday basics continue to soar for many already living paycheck to paycheck. 

Industry leaders, including JP Morgan Chase CEO are predicting the economy may take a turn worse than a recession. Mass layoffs have already been announced at many large companies across a variety of industries.

Despite economic sanctions against Russia by the LBMA, world leaders from Brazil, India and other mineral rich developing nations are looking towards the Moscow World Standard as an alternative precious metals exchange. 

In response the economic sanctions, Russia took steps to back the ruble with gold earlier this year. Leaders of developing nations are seeing how returning to a gold-standard economy may help deflect repercussions of the recession and other issues facing the US and Europe.

Key Points