Nate Fisher: Russia, Gold, Oil and the Ruble — What’s Going on and Why it Matters
Russia’s central bank recently turned heads with the news that it has started buying gold from banks again, setting a fixed price of 5,000 rubles per gram.
Nate Fisher, blogger, researcher and metals analyst at RenaissanceMen.org, has delved into this situation, honing in on how it relates to Russia’s comments that “unfriendly nations” must pay for oil in rubles or gold.
The move has generated interest due to its similarities with the gold standard system, in which a currency’s value is linked to a specific price of gold. The gold standard hasn’t been used for quite some time.
However, as Fisher explained, there’s some nuance to the current situation with Russia.
“It looks like what they’re having is the ‘unfriendly nations’ can pay in rubles or gold grams, but then for the ‘friendly nations’ they can say, ‘Well you can give us rubles, you can give us rupees, you can give us yuan, whatever it is you want to give us — fine.’ But that goes into the central bank, and in return they get oil back,” he noted.
“It is kind of like an oil window on the front end, but the back end has gold and rubles. So (Russia) can then use that currency — the gold or the rubles — to then buy other commodities.”
In Fisher’s mind, this is not a direct gold backing, but a “better mousetrap.”
“In effect, it has gold becoming currency again, and that is the one thing that kind of blew my mind,” he continued, noting that the nations Russia considers unfriendly don’t want to pay for oil in rubles because that will strengthen the ruble. But at this point they also don’t seem to want to pay in gold.
“Why won’t they just pay in gold? What’s the problem? Is the gold too valuable?” he questioned.
For Fisher, a key question is if any countries will actually buy oil from Russia in gold. “Right now I’m waiting to see in the headlines over the next couple of weeks if anyone actually does buy (oil) in grams of gold — and if that does happen, what is the value, and what will that effectively turn the gold value to?” he said.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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