3 Reasons Putin Is Bullish on Gold

NEW YORK (TheStreet) -- Before a recent pullback, gold was up double digits for 2014. Much of that can be attributed to the turmoil in Crimea and the Ukraine courtesy of Russian President Vladimir Putin. There are three reasons why Putin should be bullish for the price of gold well in the future.

1. Investors traditionally turn to gold when there is a crisis in the world.

SPDR Gold Shares (GLD) soared from around $115 in mid-December to nearly $135 in mid-March. Stocks in the sector such as Goldcorp  (GG) and Barrick Gold (ABX) surged, too. While there never was a chance that the U.S. would go to war with Russia over Crimea, gold assets still soared. What makes the future bullish for gold here is that after the anemic American response, Putin is now emboldened to move forcefully again.

2. The American response diminished the appeal of U.S. dollar holdings to foreign investors.

Many of the largest owners of Treasury bonds and other greenback assets are potential adversaries. China is the most obvious. So were the Russians. By the White House freezing some assets, foreign investors holding U.S. dollars responded by selling out their positions as a precaution. That could keep others from buying in the future. With fewer buyers, the greenback will decline in value.

3. The U.S. appears weak in international relations.

Legendary investor Jim Rogers once stated that a weak currency is the sign of a weak economy, which is the sign of a weak government. Washington Post columnist Charles Krauthammer, in a recent column entitled "Obama v. Putin: The Mismatch," likened Obama's approach to statesmanship to that of a beauty contestant "...being asked to name her fondest wish."

Secretary of State John Kerry after another failed effort in the Middle East admitted that American foreign policy had received a "reality check." Those and more do not reassure  investors that there is strong U.S. leadership.

If you liked this article you might like

These Stocks Have Changed Direction

Intermediate Trade: Goldcorp

5 Precious Metals Plays on the 'Trumpcare' Fallout

Gold and Gold Stocks Lost Their Luster Since Post-Election Highs

Bullish and Bearish Reversals in the Market