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A Note on the New Russian “Gold Standard”


After ten days of offering to purchase gold for a fixed number of rubles, the Russian central bank has announced that going forward it will pay negotiated rates in future purchases of gold in rubles.

On Friday, March 25, 2022, the Bank of Russia announced that it would set a fixed price for gold purchases made with rubles beginning on Monday, March 28th through June 30th, 2022. (Also on March 28, the Russian government further announced that international commodity purchases may no longer be made in dollars or euros, but rather that everything from oil and natural gas to grains and industrial metals must be transacted in rubles.)

At that time, the Bank of Russia stood willing to purchase gold from Russian banks at a fixed 5,000 rubles per gram, which set an effective “floor” on the ruble. At 31.1 grams per troy ounce, with the Russian central bank bidding for gold at 5,000 rubles per gram, one ounce of gold would be purchased for 155,500 rubles.

The Kremlin’s goals are obvious: They seek to force nations to transact in their currency which, owing to a comprehensive and growing array of Western sanctions, had been steeply devalued. They also, by demanding payment in rubles, are attempting to increase demand for their currency while spurning trade in the familiar medium of US dollars.

London markets have refused to accept Russian bullion for some weeks now.

Nevertheless, the ruble has recovered from its lows of 138.93 to $1 on March 7, 2022 to between 78 and 82 to the US dollar over the last few days. The exchange rate now sits roughly where it was when the invasion of Ukraine began on February 24, 2022. Demand for the ruble to consummate energy and grain purchases, battlefield losses (most notably the Russian forces’ inability to seize Kyiv), and the growing improbability of NATO intervention are moderating rates of exchange for the ruble as well.

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