Faith Many People Have In Gold Is Rising As Instability Increases

April 2, 2015
  • Inflation fears have caused a surge in Russian demand for gold jewellery
  • Currency depreciation and falling wages weighing on average Russians
  • Classified ad websites booming as Russians try to raise cash
  • Ruble has fallen more than 35% against gold in recent months
  • Ruble today … other fiat currencies tomorrow

gold in russian ruble 1 year
Gold in Russian Ruble – 1 Year

Currency depreciation, inflation fears and falling wages are weighing on average Russians and leading them to buy gold and silver bullion and some are making “unusually large purchases” of gold jewellery.

A large Russian chain of jewellery stores, Adamas, with 250 outlets across the country saw “same-store sales climb 40 percent in December,” according to a report from Bloomberg.

The role of gold as a store of value in times of high inflation is well known to Russians. “Many are still scarred by the memories of the ruble devaluation of 1998, which sent the annual inflation rate over 100 percent several months later” according to Bloomberg.

Inflation rose 17% in February against 6% for the same period in 2014. Since the economic crisis in Russia took root gold price in roubles has risen substantially.

gold in russian ruble 5 years
Gold in Russian Ruble – 5 Years

Between October and early January gold surged from around 50,000 roubles an ounce to over 87,000 roubles an ounce.

However, with the price of Russia’s main exports – oil and gas – stabilising at lower levels, the rouble has also stabilised following a collapse of 46% last year. Gold has since retraced some of its gains and now trades at 70,000 roubles – up from below 45,000 in June 2014.

However, the crisis does not look like ending any time soon. People in Russia continue to struggle. Real wages have declined 9.9% in February when compared to the same time last year. The Russian government is projecting a 3% contraction in the economy this year.

Bloomberg report on how for Avito – Russia’s largest classified ad website – business is booming as Russians buy and sell used goods to raise cash and make ends meet. It has seen a 43% increase in goods for sale since the crisis began.


Gold in Russian Ruble – 20 Year

Canned food businesses are also thriving – sales are up 10% – suggesting that Russians fear sustained crisis and potential supply chain disruptions. War frequently leases to supply chain disruptions and shortages of food, energy and staples.

Russian people suffered many economic crises over the course of the past century and the protective function that gold can play is understood by many.

“The faith many people have in gold is rising as instability increases,” Adamas executive director Maksim Vainberg said in an e-mail. “Unlike home electronics, gold jewelry can be always resold.”

The depreciation seen in the ruble is likely to be seen by other fiat currencies in the coming months and years as competitive currency devaluations and currency wars intensify.

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,201.50, EUR 1,110.91 and GBP 811.11 per ounce.

Yesterday’s AM LBMA Gold Price was USD 1,181.25, EUR 1,099.50 and GBP 800.36 per ounce.


Gold in USD – 1 Month

Gold rose 1.69 percent or $20 and closed at $1,204.20 an ounce yesterday, while silver gained 1.86 percent or $0.31, closing at $16.96 an ounce. Overnight in Singapore, gold prices went sideways prior to very slight gains in London this morning.

Gold is hovering above $1,200 an ounce after the nearly 2 per cent gain yesterday, its biggest single-day rally since January 30.

Gold priced in euros is down 0.4% this morning, underperforming spot after posting it biggest quarterly rise since Q3 2011 in the first quarter, rising 12.7%. This was largely due to a particularly strong performance in January, when it rose 16.2% prior to weakness in February in particular.

Gold ETFs posted their first net inflows in Q1 since Q4 2012 due to heavy inflows in January. Although March saw net outflows of 55.7 tons on dollar price weakness.

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Courtesy of http://www.goldcore.com/us/

Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth. 

Gold is still being mined and refined at the rate of almost 2,600 tonnes per year.