Putin’s Decision to Shoot for Gold Could Move Global Energy Trade Away From the Dollar. In a powerful and disruptive move, Putin has floated the idea of Western economies depositing gold with Russia to buy rubles, with which oil and gas can be purchased.
On 7th March, 1 US Dollar was equal to 139 Russian Ruble. On May 7th (60 days later) US Dollar slid to 66.50 Ruble. “We think the ruble may be able to advance to USD/RUB 65, even after all of its recent gains,” Sberbank CIB said in a note. Some analysts said the ruble could strengthen to 60 against the greenback by the end of the month.
Russia has been able to prop up the ruble despite global sanctions by hiking interest rates, preventing Russian brokers from selling securities held by foreigners and demanding payment for gas and oil deliveries in rubles, among other actions.
On Wednesday, the European Union’s executive proposed the toughest package of sanctions yet against Russia for its actions in Ukraine, but several countries’ worries about the impact of cutting off Russian oil imports stood in the way of agreement.
Russia slashed the value of the dollar and the euro by 30% by linking the Russian Ruble to the value of gold.
Russia’s move means that now the entire world, specially Western Europe and Japan will buy the Russian Ruble by selling dollars in huge quantities, as the Russian Ruble has become the world’s most stable currency overnight after being linked to gold.
Russia has pegged 5000 ruble to 1 gram of gold — it is seeking to counter the collapse of its currency with the backing of gold. “This is a very powerful and disruptive idea because at one stroke, a large part of the global energy trade could move away from the dollar,” an analyst commented in his opinion piece recently. “And linking a currency to gold can be seen as an economically responsible act, discouraging the wanton printing of currency, as the US has been doing for the last 15 years.”