Gold, the Ruble and Natural GasCNBC shows the Ruble has strengthened to 76 per U. S. dollar this morning after the Russia Central Bank reduced interest rates by a full 3% overnight. Yet the price of gold has not gone up as it was supposed to after Putin pegged gold to the Ruble at 5000 per gram. In fact, gold is slightly down this morning to $1936/oz. So much for the idea that the Ruble peg would force the price of gold to increase.
That said, it does bring up an interesting question. Why is the entire world willing to accept only 76 Rubles to the dollar for currency exchanges when they could be getting 80 Rubles to the dollar by exchanging gold at Putin's fixed price? Here are some thoughts/ideas on that:
1. In order to give Putin physical gold, you need to have some It could be that none is available, or that the supply of "available" gold has already been lent out ("double-booked") to support sham pricing of paper gold.
2. Countries that store gold for other countries like the U. S. and U. K. may have made policy decisions that gold will not be provided to support conversion to Rubles. This would be an interesting decision since we already know that countries like India are more than willing to give gold to Putin in exchange for Rubles to purchase natural gas. To put this another way, the U. S. and U. K. may have essentially frozen the accounts of countries like India. This was supposed to lead to demands to move the gold back to India etc. which would put pressure on the physical supply. For some reason that has not happened.
3. The folks who have been manipulating the price of gold for decades are simply ignoring the Ruble gold peg and continuing to manipulate the price regardless of consequences. This was supposed to lead to a rash of physical delivery demands so that owners of gold paper could get the better Ruble conversion price. However, it could be that holders of paper gold are afraid to demand delivery and highlight the obvious manipulation process for the world to observe in the cold light of day.
I can't say which of these scenarios are in play, only that there is now a clear discrepancy between the price of Rubles in currency vs. gold. That discrepancy translates into risk that someone will find a way to trade gold for cheaper Rubles and the movement of gold to Russia will create more stress on an already overstressed paper gold price fraud.
The discrepancy will also be very interesting to folks in China who should quickly realize that stress can be applied to the U. S. by either a) supporting the Ruble so that it further strengthens against the U. S. dollar or b) selling dollars to achieve the same effect or c) buying in more physical gold to put further pressure on the supply of gold.
Either way, at some point the market could give us clues as to what is going on behind the scenes. That will be interesting.
I would love to hear other ideas on this from the group.