A Short-lived Russian “gold standard” On Thursday, April 7, Russia’s central bank switched to a negotiated price for gold purchases.
(Reuters) - “Russia's central bank said on Thursday that due to a "significant change in market conditions" it would buy gold from commercial banks at a negotiated price from April 8.
On March 25, the bank had said it would buy gold at a fixed price of 5,000 roubles a gram until June 30.
Since that announcement, the rouble has strengthened sharply against the dollar. Five thousand roubles was worth around $52 on March 25 and around $63 on Thursday.
Gold prices on the international market have remained stable at around $60 a gram, or $1,900 an ounce.”
https://news.cgtn.com/news/2022-04-08/Russia-s-central-bank-says-it-will-stop-buying-gold-at-a-fixed-price-193UijGzUqI/index.html
April 9, 2022
“On March 25, Russia also began buying gold from banks at a fixed price of 5,000 rubles (roughly $61) per 1 gram. [Dr. Alexander Mihailov, an associate professor of economics at the University of Reading, in the UK] said the move effectively created a gold-based exchange rate of 81 rubles to $1 and helped to support the currency for a time. To his knowledge, the move also represented the first time a nation's currency has been expressed in ‘gold parity’ since Switzerland decided to end a similar policy in 1999.
‘I think the link between the ruble and gold is intended to transfer strength and credibility from gold, which is a symbol of stability,’ Mihailov said. ‘People still have this nostalgia to the gold standard…they perceive money as being tied down to gold, so it can't inflate.’
Mihailov noted that the problem for Russia, if it enacts "gold parity," is that it will also be forced to exchange rubles for gold at the 5,000 rubles per 1 gram price. If it does that, it could end up in a difficult situation where investors rush to withdraw gold from the central bank, leading to extreme destabilization in the country's financial system.
Perhaps because of this, Russia reneged on its move to buy gold at a fixed rate on Thursday, citing a ‘significant change in market conditions.’”
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“Western sanctions have devastated Russia's economy since the war in Ukraine started, and for a while, the ruble was also hit hard, losing roughly 20% of its value in the first few weeks following the invasion.
Since then, the currency has largely recovered, all but undoing the losses it suffered as a result of the war and subsequent sanctions. The appreciation has surprised experts who predicted the ruble would continue to fall, barring a ceasefire in Ukraine.
After all, the Russian economy is expected to contract by as much as 15% this year, according to the Institute of International Finance. Ratings agencies have also downgraded Russian debt to junk status, arguing the country may be headed for ‘imminent’ default. That kind of pessimism should, in normal circumstances, lead to a depreciating currency—but the ruble has proved to be resilient.
U.S. Secretary of State Antony Blinken told NBC’s ‘Meet the Press’ on Sunday that Russian "manipulation" was the main cause of the ruble's recent rebound after the Russian government restricted its citizens from transferring money abroad.
‘People are being prevented from unloading rubles. That's artificially propping up the value. That's not sustainable. So I think you're going to see that change,’ Blinken said, adding that he is working every day to tighten sanctions and close loopholes that have allowed the ruble to appreciate.”
https://www.yahoo.com/video/sanctions-were-supposed-crush-russian-120000394.html