G7 countries are expanding sanctions and banning imports of gold from Russia

The U.S., along with the rest of the G7, will ban Russian gold imports as part of expanding its sanctions regime against Moscow, a U.S. government official said.

The move, which comes as part of the G7 summit that will last until Tuesday in the Bavarian Alps, is a new step in the effort to punish Russia for its invasion of Ukraine, says a source in the US administration, who noted that gold is Russia’s second most important export after energy.

“The United States has urged the world to exact a significant price from Russia in order to prevent Putin from the proceeds he needs to finance his war,” the source said. “President Joe Biden and G7 leaders will agree to ban the import of new gold from Russia.”

The goal: to isolate Russia from the world economy

Moscow’s aggression against Ukraine is one of the key issues to be discussed at the three-day summit. While Russia has suffered economically from the sanctions, it still sells oil and gas to China, India and other countries not taking part in the boycott efforts. Commodity prices that have risen since the war began have helped the Russians offset some of the impact of sanctions.

On Tuesday, the U.S. Treasury Department will enforce the ban on new gold imports in an attempt to “further isolate Russia from the world economy,” the official said.

Other G7 companies have not announced their position on the ban, and the US source did not specify when there will be an official announcement on the matter. A spokesman for the German government, which currently holds the presidency of the G7 and is hosting the summit, has not yet responded to a request for comment.

Russia’s central bank holds more than 2,000 tons of precious metal, worth about $ 140 billion and is the fifth largest gold reserves in the world, according to the World Gold Council.

A tenth of the world’s gold supply

Analysts say the ban could skyrocket the price of metal. Meanwhile in this quarter, gold prices fell due to high interest rates and the strengthening of the US dollar. The declines in gold happened even though inflation reached its highest level in several decades.

Investors love gold because of its stability in times of unrest, and expect it to maintain its value even when other assets decline in value. The ban on Russian gold “is only going to make supply less, and that should mark the trend of what will happen to gold,” said Mike Butros, a strategist at DailyFX. Russia is responsible for about a tenth of gold’s global supply.

White House spokesman John Kirby declined to say what further action would be taken against Russia at the summit of leaders. “There will be some announcements,” he told reporters on President Biden’s plane as they flew to Germany on Saturday. “There will be some muscle demonstrations.”

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