»Fast Profits Daily by Equitymaster

On This Day - 30 JUNE 2022
Is Gold a Buy After Sanctions on Russia?

Vijay Bhambwani, Editor, Fast Profits Daily

Russia is about to face difficulties in selling its gold after the G7 members decided to ban its import.

Does this mean the price of gold will go higher or lower?

In this video, I'll break down the logic of the gold market and let you know how to trade gold.

Watch the video and let me know your thoughts on gold.

Hello, friends. This is Vijay Bhambwani and in my videos, I'm trying to help my viewers decipher the subtle messages of the markets and help them to understand the market nuances better.

In this particular video, I want to help you think, and think better, about what happens in the market at any given a point in time when news is announced.

Now, obviously, there are two schools of thought in the market. One would think that the news is positive and buy, and the other would think that the news is negative and they would sell.

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We traders are brain warriors. We get rewarded by the markets in what is known as profit, for thinking right and going right, and nothing happens in the financial markets without a reason, and the reason is invariably financial.

So recently you'd have read the news that the US is trying to influence its European partners into imposing sanctions on Russia and stop Russia from selling its gold in the international market.

We all know Russia is one of the swing producers of gold, and it's gold output and sales in the international market can influence the price of gold significantly, which is why it is called a swing producer of gold.

Now, can these sanctions on Russian gold sales impact the price of gold? And if yes, in what direction?

For a trader, knowing the direction is everything. If you get the direction wrong, nothing can save you. In that case, you're bound to lose money on your trade, and knowing the direction right is the first step towards making a profit.

Now, let's examine some events in the past, not so distant past, and some events in the very recent past, with Russia itself.

Now, those of you who've been trading commodities for a very long time, will recollect that the ISIS the Islamic state, grabbed a few oil wells in Iraq, and when this happened, the news media went berserk with excitement and said oil prices would shoot up because ISIS now controls the oil wells.

The point is that oil prices actually fell very sharply. The more the ISIS tried and commandeered more and more oil assets, the more the price fell.

Why? Because to ISIS, oil was merely a means to an end. The means to raise money by selling oil at whatever price they felt was right. Their cost of oil was zero. So whatever price they got was 100% profit. With that money, they could buy more weapons.

Now, this went against the expectations of a whole lot of people in 2014 that the ISIS capturing oil wells would send the price higher. Oil actually fell.

Now fast forward to 2022. In February, the Russians attacked Ukraine and the Western allies, starting with the United States, immediately pressurised the Europeans and others who were in their sphere of interest, about not buying oil and gas from Russia.

What really happened? The Russians started to sell oil at a steep discount. Initially, there were worries because insurance companies refused to cover oil tankers that we're venturing towards Russia or Ukrainian sphere of war saying that no insurance cover would be given to such tankers.

The Russians found a way out by giving delivery of oil ex-Singapore. They started with a 20% discount, went up to 22% discount, and I've heard reports of as much as 28% discount to the then prevalent price in Europe, which is where Russia started selling oil.

So any embargo on oil and gas failed. In the past, in the case of ISIS when the ISIS captured oil wells, prices fell. In the case of Russians, when they were stopped from selling oil. Similarly markets thought oil would shoot up and you'd have heard reports about, estimates about 175-200 maybe even 225-250 dollars per barrel.

We're still struggling, where WTI is concerned, we're still struggling to break out above 115.

I'm not saying that price will not go up, but I am basically trying to tell you to think the way the market thinks. What if the Russians were to do to gold what they did to oil, which is hey, we're gonna give you gold delivery X, Y, Z place, not in Moscow but at 3, 4, 5, or 7% discount. Is that possible? Very possible. Definitely possible.

We all know that in commodities, I have recorded ample videos in this playlist. If you care to or if you make the effort to go down this playlist, you will find a video last year about shadow inventories in the commodities business. How commodities are also traded off the books, off the records, and there is very little if any, by way of an audit trail.

So can Russians start to sell gold in the international market at a slight marked down or a slight discounted price and still be able to raise cash? Very possible. Very possible.

This is why I think my viewers, my friends on social media watching this video, should not get too gung ho or too excited about the Russian sanctions on gold being the be all and end all trigger to buy gold.

Yes, I am bullish in gold. Yes, I'm bullish on silver for the long term, but I still maintain till eighth of November 2022, as long as the mid-term elections in US are not done and dusted, expect some pressure on the price of gold, and sanctions on Russia need not be as bullish a trigger as the overall market is expecting it to be.

It is very important to know how to think rather than what to think. What to think is a mathematical rigid formula, and how to think, takes care of the wheeling, dealing, and changing scenarios in the market, which financial markets are so expert in doing.

I have this video helped you understand the gold market a little better as compared to what you were understanding before watching this video.

On this optimistic note, I bid goodbye to you, not before reminding you to click like on this video if you liked what you saw. Subscribe to my YouTube channel if you haven't already done so. Click on the bell icon to receive instant talents about fresh videos being put up out here.

Good, bad or ugly, I love to hear you hear your feedback in the comments section and help me reach out to fellow smart traders like yourselves by referring my video to your family and friends.

Thank you for your patience and watching my video. Till we meet in my next, this is Vijay Bhambwani signing off for now. Have a very, very profitable day ahead. Bye.

Warm regards,


Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

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