Ruble is "Heavier" than Gold

Russia faces a contradictory situation in the global gold market

A contradictory situation has emerged in the gold market. While the dollar price of gold on the international market continues to set new historical records, the ruble price of gold in Russia is falling. The domestic gold price has dropped from 9000 rubles per gram to less than 8000 rubles. What is causing this? In what situations would the price of gold rise in both pricing methods?

The price of gold continues to break historical records, reaching a new high of $3050 per ounce this week. However, the contradiction lies in the fact that the ruble-priced gold price has fallen from a peak of 9000 rubles per gram of 999 purity to less than 8000 rubles at present. Why is the dollar price of gold on the international market setting new all-time highs, while the ruble price of gold in the Russian market is falling instead?

"This strange situation is due to the significant strengthening of the ruble. This week, the exchange rate of the dollar to the ruble could even fall below 80. At present, the increase in the dollar price of gold has not yet offset the impact of the ruble's strength," said Alexei Viyazovskiy, vice president of the "Gold Sector" company.

He believes that now is a good time for investors who are waiting for the price of gold to drop before entering the market, as he does not believe the ruble will strengthen for a long time and expects the ruble exchange rate to fall by May. Therefore, Viyazovskiy maintains his prediction for the ruble-priced gold price: the price of 999-purity gold is expected to reach 10000 rubles per gram.

"From the perspective of transaction volumes of gold-related enterprises and banks, the variety of products, the ease of entry for new participants (such as the Russian State Precious Metals Vault and refineries), and the emergence of various trading methods, the Russian gold industry has generally entered a golden age. There are many innovations and applications in our gold market. Industry conferences are also highly anticipated," said Viyazovskiy.

Meanwhile, on the international market, gold remains solid, and experts expect its price to reach new highs. Major banks have raised their predictions for the dollar price of gold. Viyazovskiy said that Macquarie Group expects the price of gold to reach $3500 per ounce, UBS predicts $3200, Citibank predicts $3200, and Goldman Sachs predicts $3100. The average consensus forecast indicates that the price of gold will reach $3258 per ounce this summer.

"The increase in the price of gold has exceeded expectations. Whether it was last year or the year before, the banks were unable to update their forecasts in time, and the price of gold had already reached the expected level," said Viyazovskiy.

"In our baseline scenario, we expect the price of gold to reach $3300 per ounce. The reason for the increase is the high level of uncertainty in the market and the risk of Iran being involved in the Middle East conflict," said Nikolai Dudchenko, analyst at the Finam group.

"Gold will continue to rise in 2025, reaching $3500 per ounce. Central banks, especially those of the BRICS countries, will continue to purchase this precious metal, while the people of China and India will continue their national traditions, driving the growth of the gold jewelry market," said Fan Yevdokimov, analyst at "Digital Broker."

However, there is a pessimistic scenario. "Considering the extent to which the current price deviates from the mean, it cannot be ruled out that the market may experience a correction. We believe that during the correction, the price may return to the level of $2400-2500 per ounce," said Nikolai Dudchenko.

There are several reasons for the gold price breaking new records. Dudchenko pointed out that the first reason is the increased geopolitical risks, as the US conducts military actions in Yemen, and Israel continues to take action in Gaza. Gold plays the role of a safe-haven asset.

"The second reason is the weakening of the dollar. The traditional correlation - the lower the dollar exchange rate, the higher the gold price, and vice versa - is not always valid. However, this year, this rule has been followed, with both prices maintaining a negative correlation. The third reason is the market's concern about an economic recession under the context of Trump's protectionist actions (tariff wars), which also attracts market participants to turn to safe-haven assets," said Dudchenko.

Viyazovskiy believes that the main reason for the rise in gold prices is not related to geopolitics but rather to the good inflation data in the US: the US producer price index was below analysts' expectations, allowing the Federal Reserve to further cut interest rates.

"The Federal Reserve may begin to relax its monetary policy at the meeting in May. Interest rate cuts are always beneficial for gold because there is a direct correlation: the lower the cost of capital, the higher the gold price.

Even the expectation of a decrease in the cost of capital can have a positive impact on the gold price. Therefore, I believe that it is not unrealistic for the gold price to reach $3500 per ounce by late summer," said Alexei Viyazovskiy.

He stated that the Ukraine situation currently has no impact on the dollar price of gold, as the geopolitical premium has already been reflected in the price. "If a long-term agreement on the Ukraine issue is reached and complied with, the geopolitical premium in gold will disappear. This may be worth $200-300. But even $2600-2700 is a high level, just that the current price is absurdly high," concluded the interviewee.

Original: https://www.toutiao.com/article/7533919151459484202/

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