13:46 GMT +325 September 2016
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Can Russia's Big Gold Hedge Save the Ruble?

© Sputnik/ Pavel Lisitsyn
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In 2016, the ruble has skirted with all time lows as crude oil has collapsed, US and European sanctions have cut off lines to cheap credit, and inflation is pushing double digits. However, the rising price of gold could give the ruble a reprieve and even save the currency.

Sam Mcculloch — The yellow metal, whose price has risen almost 20% in the last few weeks, represents 13% of Russia’s total foreign exchange reserves.

In 2015, Russia increased its reserves by 208.4 metric tons to 1415 metric tons total, a 17% increase. The total value at the end of December was around $48.6 billion when gold was trading at its six year lows of $1062. Now with the massive rise of gold since the end of 2015, the expected value of Russia’s reserves is around $61.8 billion.

Additionally, in this period, the US dollar has declined in price. The DXY, a geometrically weighted basket of six currencies containing the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, has fallen almost 5% and shows no sign of bottoming out.

Thus, while oil is skirting with decade old lows and has severely impacted the value of the ruble, the rapid rise in gold may be able to help the Russian central bank stem off some of the pressure on its currency. In fact, the ruble has been gaining in value to the dollar in relation to the price of gold and if gold continues its upward spike, the ruble may be able to claw back some of its previous loses against the dollar.

While the ruble ultimately will be connected to the price of oil at the end of the day, Russia’s smart move to bolster its gold reserves over the past several years is finally paying off.

Related:
Russian Bank Chief Dismisses Reports on Artificial Ruble Devaluation
US Investors Gaining Confidence in Russia’s Ruble
Ruble Strengthens Against Dollar, Euro on Growth of Oil Prices
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economy, gold, currency, ruble, Russia
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  • backfromthegraav
    Russia will leave AmeriCun brent ,,,, and go to Russian Ruble for Oil ... problem solved .... Brent only for West only for countries that use AmeriCun Dollars !
  • Mitach2002
    When the terrorist American government and the rest of the western nations with fiat money collapse they'll wish they had gold. Canada's government holds less then 2 tons.
  • slimyfox
    Russian Central Bank should not touch gold reserves in order to save rouble. Rouble is national currency and it is intended for internal payment system and as such is not influenced with foreign exchange rate. Only inflation, deflation and stagflation are financial conditions within state that will influence Rouble value.

    Gold should remind untouched and accumulated, and what happens to rouble on a Forex who gives dam. Even if financial speculators as Soros try to crush it to the dust, so be it. Russian CB should not touch it.

    Russia is thanks to not so wise economic policies of orienting on import of consumables and export of raw energy products now in clear deficit of currencies for imports as value of exports plummeted to the basement.

    Russia should make every possible effort to protect population and fighting for Rouble is surely not the right one. Whoever will suffer because wont be able to travel abroad and have great time in spending hard currency or who will be pissed off because he wont be able to buy brand new BMW, Mercedes, Jaguar, Bentley, RR or any other super-car will have to chew hard and stay at home (Russia is bloody big and unexplored country) and of course either wait better times or buy domestic car which will adequately perform requested performance of bringing person from one place to the other.

    In large scale it is clearly government responsibility how to arrange domestic economy. Government is responsible on few levels and beside that leaning on exports of energy not even processed energy for added value but pure raw energy at lowest possible value.

    Is governemnt responsibility to direct economy into right direction. There should be reduced and even banned imports of so many products only to boost domestic industry. One of these is automotive industry where Russia is totally net importer and annually pays more than 40 billion for imported cars. If these funds would be invested in domestic automotive industry, it would rejuvenate as did Skoda.

    That clearly shows that there were other forces in play and here I have in my mind oligarchs who are cancer in any society especially in transitional economy which is usually very vulnerable to any market anomalies. The biggest anomaly are OLIGARCHS whose only motivation is stealing money and bringing it our of country on safekeeping in particular in USA as they will never allow any US$ to be returned to Russia.

    Beside that Oligarchs are in controlling seat of the whole import and export. Just have look who owns biggest car import chains in Russia. You will find that there are oligarchs again and they do not allow imports to be slowed down as they get profit from that. They are the one who are not patriots, who would betray Russia for a fistful of nickels. These are people Russian government should tackle before even starts to think about restructuring Russian economy.

    Imagine someone who is terminally ill as has metastatic Cancer and no more than few months of life and he starts to make plans for a long period of investing money here and there and doing this and that. That is all positive but alas no effect will come out as he will be dead long before start of first project.

    Russia needs to heal this cancer of thief and cheaters and press RESET bottom and started investment in domestic industry. Privatisation of state owned corporations should be terminated as oligarchs are bringing USA money and the company is then under the USA control.
  • Jeremin reply toslimyfox(Show commentHide comment)
    You are totally right.
  • Porkbelly Porkerpig
    A major dollar crisis will send the price of gold up exponentially, without warning; before there is any time to react to it. So, by definition, the Gold Reserve will be positive for Russia, if anything bad ever happens to the US dollar.
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