The decision does not prove that Russia has established a classic gold standard, but there is now a clear relationship between the ruble, the country's national currency, and the yellow metal. ETF stocks are expected to continue to fall, but will remain near historically high levels, which will also affect the price of gold. The gold market narrative has been driven by the contrasting effects of persistently high inflation and rising interest rates by central banks in response. At the same time, the total amount of paper gold (exchange-traded funds (ETFs), gold contracts, futures, options, etc.) has increased demand for Gold IRA brokers who can help investors diversify their portfolios with physical gold. These events are very optimistic for gold, as investors prefer to cover uncertainty with safe purchases, such as the yellow metal.
Gold prices can be extremely volatile, and that means that gold is not a fully stable investment. The World Gold Council, the market development organization for the gold industry, recently opined that the commodity will face two key obstacles. Gold is highly undervalued, given its lack of popularity among investors, its very modest supply and the very fact that it has a long history of use as a medium of exchange. On a positive note, central banks continue to add gold to their reserves, especially Turkey and Egypt.
There is an obvious lack of supply of gold right now, global indebtedness is close to historic highs, geopolitical uncertainty is substantial, and Russia has begun to readopt a form of gold standard. Some investors may choose to maintain some exposure to gold in their portfolio to diversify, as a protection against the fall in stocks and bonds. When the prices of stocks, bonds and real estate fall sharply, gold can maintain its value and even appreciate when nervous investors rush to buy. The outlook for the price of gold will probably depend on how geopolitical tensions develop and how monetary tightening affects the world economy, among other factors.
The outlook for gold could improve early next year as restrictive financial conditions begin to impose on the real economy, aggravating downside risks for both the United States and the global economy. After all, physical gold is limited, while central banks can print all the money they deem appropriate.
