Russian Gold buying 5000 rub/gram

[stella polaris]

This is not intended to be political. Rather an pure economical discussion about the possibilities laying ahead..

Russia did state they are buying gold for a premium. They pay 5000 rubels/gram. As I see it Russia can do this without any major cost. If they "print" this currency it will not really give a negative effect to the ruble. This since the gold will back up the new rubles. In fact the more they buy the better the gold reserve/currency volume rate will be. In the same time they make Rubles avalible for Oil payments.

If now Russia is aiming on a gold backed Ruble, by buying large quantities of gold, it will most certain affect the gold market. But how? Will west try to raise the gold price in order to make it more expensive for the Russians? Or will they try to impose a gold export ban to Russia? Any other economical reactions from West?

 

[nickvc]

Remember that Russia itself is a large gold producer so if it is looking to back the Rouble with gold they are in a fairly strong position to do so.

 

[stella polaris]

You right there Nick. They have a lot of placer gold and placer platinum in the Far East. But what about export/import at this moment? Have tried to find figures but find no new numbers. 2020 they have a peak in export. (like 17B $) Seems like 91% went to Uk. But what are the export now?
If Russia suddenly stop to export it must affect the market. If they simply buy the Russian gold themself. The premium might be an incitament to sell to government.

 

[stella polaris]

I start to see a logic reason for this 5000 rubel/gram thing. The Russians had their plan ready how to counter sanctions. Today the ruble is stronger than ever. So strong that it can actually create an problem for the industry. By setting a 5000rubl/gr purchasing price they actually create a max ruble value.

How can this be?
Oil for rubles. Minerals for rubles. Furtilizer for rubles. e.t.c. The demand for rubles are increasing => Higher value for the ruble. If to high value the Russian industry will suffer. By purchase gold for 5000 rubl/gram Russia will avoid additional raise of the ruble value. If higer value it will create a incetament for selling gold for rubles. These rubels can then be sold to those in need of rubles to buy oil, minerals or furtilizers. Easy profit can be made. This will actually mean (Short term) that the Russians tie the ruble to gold at 5000 ruble/gram. Remains to see if they will reach this ruble value and, if so, if they will continue to connect the ruble to gold in this way. De facto putting the price of gold to 5000 ruble/gr. It will no longer be Dollars, Punds and Euros flowing in to the Russian treasury. It will be gold.

It vill be an indirect oil for gold scenario.