The gold standard of sanctions – Newspaper Kommersant No. 237 (7438) dated 12/21/2022

The cost of gold on the Moscow Exchange after a seven-month break rose above the level of 3.9 thousand rubles. for 1 year. During the week, the precious metal has risen in price by 8%, which was largely determined by the growth of the dollar. With the weakening of the Russian currency, private investors began to actively buy gold, which led to a sharp increase in trading volumes. Until the end of December, the market does not expect a strong change in prices, but next year the rise may continue both due to the global market conditions and further weakening of the ruble.

On Tuesday, December 20, the price of gold on the Moscow Exchange updated a seven-month high. During the trading session, the value of the metal rose to the level of 3.94 thousand rubles. per 1 g, which is 3.7% higher than Monday’s closing values. As a result of the auction, the price stopped at 3.93 thousand rubles. for 1 year. A steady increase in the cost of the precious metal has been observed since the beginning of the month. During this time, it has risen in price by 14%, and over the past five days – by more than 8%.

Strong growth is only partly due to rising prices in the world market. Gold rose 1.9% on Tuesday to $1,821 a troy ounce, a week ago, according to Investing.com. Since the beginning of the month, quotes have grown by only 3%. This is facilitated by market participants’ expectations of a smoother increase in the Fed’s key rate.

On the Russian market, the effect was reinforced by currency revaluation against the background of the rapid growth of the dollar. On Tuesday, the rate of the American currency on the Moscow Exchange rose by 1.7% to 68.87 rubles/$, up 9.5% from a week ago. The Russian currency is rapidly losing ground amid a decline in exports due to expanding sanctions, as well as an increase in imports (see “Kommersant” of December 20).

In the face of increased devaluation risks, market participants note a growing interest in investing in gold. “In recent days, there has been a noticeable increase in customer interest in the precious metal,” says Nikita Silkin, head of the department of the Internet broker BCS World of Investments. Ruslan Muchipov, Head of Asset Management at Tinkoff, spoke about the growth in demand for gold, both on the exchange and in bullion. According to the Moscow Exchange, gold trading volumes for “tomorrow” delivery this week are above 570 million rubles, which is almost twice the average last week.

A noticeable weakening of the ruble caused investors’ increased interest in other foreign exchange assets, said Dmitry Skryabin, portfolio manager at Alfa Capital.

But in the face of sanctions risks and restrictions on owning the currencies of unfriendly countries, gold remains a good alternative.

“Unlike buying foreign currency, gold is not subject to the risk of sanctions, but at the same time, its price in ruble terms changes following the growth of the exchange rate,” says Nikita Silkin.

However, in the coming days, the market does not expect a strong increase in dollar prices for gold, but due to the further weakening of the ruble, local players can count on an increase in the ruble price. “Now we are entering a period of holidays, when investment activity traditionally fades, so by the end of the year gold prices will be near current levels, unless something unexpected happens in the world,” notes the director of the investment and corporate business department at Tsifra Broker. Alexander Tsyganov.

In 2023, prices may rise against the background of the global economy entering a recession and record purchases of physical metal by the Central Bank. “China will most likely continue to diversify its gold and foreign exchange reserves in favor of alternative instruments, reducing positions in the currencies of the United States and the Eurozone against the backdrop of record-breaking inflation in these countries over decades and, possibly, a precedent with the freezing of part of Russian gold reserves,” Dmitry Skryabin believes. The effect will be amplified by the further weakening of the ruble, whose exchange rate against the dollar, according to PSB analysts, will reach 75-80 rubles / $ at the end of 2023. With such a rate, even if dollar prices remain at the current level, ruble metal prices will rise to 4.4–4.7 thousand rubles. for 1 year

Vitaly Gaidaev