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(Kitco News) - The devastation created by Russia's invasion of Ukraine continues unabated and it is now starting to have significant implications for the global economy. According to some economists, we are witnessing the end of globalization.

Lines are being drawn between allies and opponents that won't easily be undone, even if the conflict in Eastern Europe were to end. Gold, it appears, is playing an essential role in this new environment, where currencies and commodities are being weaponized.

Global commodity markets remain in chaos as nations look to establish their own domestic supply chains. The biggest impact is being felt in the energy sector as Russia's nat gas represents 40% of European demand.

There is a growing threat that Russia could weaponize its commodity markets as it demands 'unfriendly nations' pay for their energy in rubles. Russia is also looking to accept gold and even bitcoin for its oil and gas. According to some economists, Europe, already teetering on edge, could fall into a full-blown recession if Russia decides to withhold supply.

As pressure mounts, Europe is looking to wean itself off of Russia's oil and gas, but that won't happen until the end of this decade. Energy is just one commodity, but it's not alone; agriculture and base metals are also impacted by rising geopolitical tensions caused by the conflict.

Looking at the broader picture, many economists and market analysts see a growing trend where nations warry of the U.S. and its western allies start to reduce their exposure to the U.S. dollar. This is not going to happen overnight. The U.S. dollar presents about 60% of total global reserve assets. It could take decades for the U.S. to lose its reserve currency status, but that will not stop some governments and central banks from diversifying their holdings now.

When gold's volatility calms down, prices will rally back to $2,000 - DeCarley's Garner

Gold is the most attractive asset because it is seen as a store of value and has no counter-party risk.

Not only are nations trying to insulate themselves by diversifying, but we can also expect that the development of domestic supply chains will lead to elevated consumer prices. We can no longer reply on global markets for cheap goods and gold is an attractive asset for consumers looking to preserve their purchasing power. We are already seeing this in Russia.

This week, according to a report from Kitco's Anna Golubova, the state-controlled VTB Bank, Russia's second-largest lender, sold one tonne of gold to consumers in March. The most in-demand product is its one-kilogram gold bar, worth about $68,000.

As long as chaos reigns, gold will shine as solid currency.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.