A gram followed an ounce – Newspaper Kommersant No. 42 (7487) of 03/14/2023

The price of gold on the Russian exchange market for the first time since April last year rose above the level of 4.6 thousand rubles per year. This was facilitated by an increase in the cost of the metal on the world market above the level of $1.9 thousand per 1 troy ounce, a maximum over the past four weeks. The price of gold was affected by the bankruptcy of a number of US banks, which worsens the prospects for the world’s largest economy and increases the likelihood of easing the Fed’s monetary policy.

The price of gold on the Moscow Exchange on March 13 rose above 4.6 thousand rubles per year for the first time in eleven months. During the auction, the price of the metal reached 4.61 thousand rubles per year, the maximum since April 26, 2022. As a result of the trading session, the quotes stopped at the level of 4.6 thousand rubles per year, which is 1.6% higher than the closing value on March 10.

Since the beginning of the year, gold has risen in price on the Russian market by almost 14%, and in the last week alone, the growth was about 4%.

The renewal of the multi-month high was facilitated by the growth in gold prices on the world market. The stock hit $1,913 per troy ounce on Monday, according to Investing.com, the highest level since Feb. 3. This is 2.4% higher than last Friday, and in two days the metal has risen in price by almost 5%. There has not been such a strong rise in prices in such a short period of time since the first decade of November, then, against the backdrop of a rapid fall in the dollar, the metal added more than 5.4% in price, but the price reached only $1,717 per ounce.

The current rise in the value of the precious metal took place against the backdrop of bankruptcy American banks Silicon Valley Bank and Signature Bank, as well as reports of a difficult situation in a number of US banks. This led to an increase in market participants’ fears about the prospects for the country’s economy, which contributed a decrease in risk appetite and a fall in the leading European indices by 2-4%. American indices at the opening of trading on March 13 fell by 1-1.4%, but by 20:00 they went into the “green zone”.

“Market participants are afraid of the negative development of the situation and turbulence in the entire banking sector – such volatility leads to an increase in demand for protective assets such as gold,” said Dmitry Puchkarev, an expert on the stock market at BCS Mir Investments.

Under the circumstances, the Fed was forced to hold an emergency meeting. According to Anna Pilgunova, Senior Analyst for Commodity Markets at SberCIB Investment Research, against the backdrop of such events, the market expects a softening of the rhetoric of the American regulator, since it was the sharp increase in the rate last year that caused the bankruptcy of financial institutions in the United States.

In favor of easing the Fed’s monetary policy, weak data on the labor market published last week play: unemployment in February was higher than expected, and growth in the number of people employed outside the agricultural sector turned out to be lower than the previous value. “Since the labor market is one of the key factors that the Fed looks at when making decisions to raise the rate, investors took this news as a potential signal that the regulator may refrain from a more serious tightening of monetary policy,” notes Mrs Pilgunova.

Further dynamics in the global and Russian gold markets will depend on the actions of the US monetary authorities to stabilize the situation and the market’s reaction to them. The US authorities have already announced emergency measures to support the banking sector, as well as depositors of Silicon Valley Bank and Signature Bank. “If the situation can be stopped, gold prices will lose their incentive to grow,” Dmitry Puchkarev believes. Due to the fact that ruble gold prices correlate with the world benchmark, a reversal in dollar prices may lead to a decrease in prices in Russia, but adjusted for the local dollar exchange rate.

Vitaly Gaidaev