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The Russian Ruble / Gold Game

It appears that Putin’s very clever chess move to get his customers to pay for his commodities in Ruble or gold at a 30% premium on 25 March 22, has paid off handsomely, because the Ruble increased it’s value from 102 to a US$ to 72 today, courtesy of the arbitrage market!!!
April 29, 2022

What does the future hold for the Ruble??

The premium has just turned to a discount today, partly because of the drop in the gold price, and partly because of the strength of the Ruble. For a very short while there was a major arbitrage opportunity to buy in Rubles and sell gold at LBMA price. The Ruble has now strengthened back to it’s pre war relationship to the US$!!!

How much did the gold link to the Ruble help that recovery?. It is now more expensive,  by 3% today, to pay gold for Rubles at Rub5 000 per gram of gold.

Putin now has two positives:

  1. The Ruble value is now at pre-war levels.
  2. The price of oil is about 10% more than pre war levels. Gas has also risen, and is currently 25% up on early March prices.

There has also been a major shift in this move by Putin, because as the Ruble strengthens the arbitrage will go the other way, and buying gold at LBMA prices and selling gold for Rubles will generate an arbitrage profit!!!

But that is not the major issue. It now pay Russian customers to buy Russian produce for gold, at a discount!! It could be that the Ruble could be on it’s way to a major rise????

This creates a double benefit for Russia:

  1. The Ruble become more valuable
  2. The gold coffers will fill up even more, both taking gold out of western coffers and increasing real money assets in Russia.

The other side consequence is that it speeds the end of the FIAT currency era!!