Russia no longer wants gold

US, WASHINGTON (ORDO NEWS) — The new week for gold prices did not start very well. Although the bulls still manage to keep the price at $ 1,600 per ounce, pressure on them continued on Tuesday. To date, gold has fallen in price by about $ 10. Silver, after yesterday’s significant drawdown, stabilized somewhat.

The situation with gold, at first glance, is somewhat surprising – after all, this year the supply on the world market will decrease due to the closure of the mines.

However, not only the supply will be reduced. Obviously, a major buyer at the moment also seems to be saying: “Thank you, don’t.” From the beginning of April, the Central Bank of Russia will stop purchasing gold on the domestic market. As a justification for this step, he cited the high volatility of prices for the yellow metal. Moscow has not given any explanations regarding the further policy of its Central Bank regarding gold: it all depends on volatility.

The problems are definitely deeper: the collapse in oil prices hit Russia painfully. The country is very dependent on oil and gas exports, and foreign exchange earnings in its budget are declining, and therefore it simply does not have enough liquidity to buy gold. The announcement came at a time when many investors were afraid that soon there would simply be no more gold to buy.

Russia, along with the central banks of other developing countries, was definitely one of the main buyers of gold in the world market. But the fact that the price of gold due to the closure of mines and mints in the past days has not increased even more, says that the physical gold market is only one of the factors of price formation.

The market for “paper” gold is many times larger, and although there are problems with contract supplies right now, the price could not “fly to heaven,” which some were so afraid of.

This shows that the price is still heavily dependent on the paper gold market. In view of this, one should not take too seriously the refusal of the Russian Central Bank (so far temporary) to further purchase gold. However, in the short term, it really can have a certain psychological effect.

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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.