Russia sets fixed gold price as it restarts official bullion purchases

(Kitco News) Russia’s central bank resumed gold purchases from local banks on Monday, but set a fixed price for the precious metal.

Starting this week, the Russian central bank will pay a fixed price of 5,000 rubles ($52) per gram between March 28 and June 30, the bank announced on Friday. This is below the current market value of around $68.

The central bank added that the resumption of purchases will ensure the uninterrupted supply and production of local gold.

Two weeks ago, Russia’s central bank announced that it was halting its official gold purchases from local banks due to an increase in demand from regular consumers.

Indeed, the Russians went on a gold-buying spree in March to protect their economies as the ruble plummeted. Major Russian banks have reported a rush of consumers investing in bullion and coins.

Sberbank, Russia’s largest financial institution, said demand for gold and palladium has quadrupled in recent weeks. Meanwhile, the Russian Finance Ministry has also called gold an “ideal alternative” to the US dollar.

Setting a fixed price for gold reminds some analysts of what the United States did during the “gold standard” years. The period between 1879 and 1914 is known as the era of the classic gold standard, during which one ounce of gold would represent 21 dollars. Then, in the 1930s, the United States banned the possession of gold and raised the value of the gold dollar from $20.67 to $35 an ounce.

This price remained fixed until 1971, when Richard Nixon ended the convertibility of the US dollar into gold, which meant that other countries could no longer exchange dollars for gold. In 1973 the gold standard was abandoned.

“I remember what the United States did in the middle of the Great Depression. For the next 40 years the price of gold was pegged to the US dollar at $35. There is precedent for that This leads me to believe that Russia’s intention would be for the value of the ruble to be directly linked to the value of gold,” Everett Millman, precious metals expert at Gainesville Coins, told Kitco News. “Fixing a fixed price for rubles per gram of gold seems to be the intention. That’s quite significant when it comes to how Russia might seek funding and manage its central bank funding outside of the US dollar system.”

Gold is one of the most logical international currencies to use when trying to circumvent sanctions, Millman added.

Sanctions against Russian gold

Last week, the US Treasury banned all gold transactions with the Russian central bank.

“U.S. nationals are prohibited from engaging in any transactions – including gold-related transactions – involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation,” the Treasury said. on its website.

These types of sanctions could be effective to some degree, Millman said. “It can have a significant impact if only to force other partners to avoid doing gold transactions with Russia. At the same time, knowing that the global gold market can be rather opaque, it would be much more difficult to enforce this type of restriction or regulation,” he explained.

In response to escalating Western sanctions over Russia’s invasion of Ukraine, Moscow says ‘unfriendly’ countries could be made to pay for Russian gas in rubles or gold, president says of the Duma Committee on Energy.

“If they want to buy, let them either pay in hard currency, and it’s gold for us, or pay as it suits us; it’s the national currency,” Pavel Zavalny said during a Thursday press conference.

Russia is also considering accepting bitcoin for its oil and gas exports and being more flexible in general regarding payment options with “friendly” countries.

“We have long been proposing to China to switch to national currency settlements for the ruble and the yuan… With Turkey it will be the pound and the rouble,” Zavalny said. “You can also trade bitcoins.”

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