The government of Russia had pegged that country's currency - the ruble - to gold. Russia's central bank announced it will buy gold at 5,000 rubles per gram through June 28.
On the day that Russia set the bid at 5,000 rubles, the dollar-ruble exchange rate translated to gold at about $1,550 per ounce, or well below the London daily quote. Within days of the Russian announcement of rubles for gold, the Russian currency strengthened firmly against the dollar. About two weeks after the initial announcement, those same 5,000 rubles per gram translate to a gold price of about $1,925.
Russia's hard fix of rubles for gold has equilibrated with the dollar-ruble valuation. Russia has just undermined the ability of "paper" gold traders to sell the metal down too far, lest the spread open and arbitrageurs swoop in.
Its impact is that gold-backed floor price in which even the world's most aggressive gold traders and market makers cannot sell the metal down, lest they fall into their own trading trap.
Russia's gold gambit hinges on the country's exports of natural gas. That is, Russia has told all buyers that it will sell its gas to "unfriendly countries" only for rubles.
More practically for the nations of Europe, Russia will accept no dollars or euros for gas, just rubles (or gold of course). And suddenly, literally within a matter of days, many gas buying nations must come up with a whole lot of rubles. Many dollar-holders will then lighten up and sell bucks to buy rubles, as well as buy physical gold.
This is in turn weakened the USD dollar and strengthened the Russian Ruble.
The exchange rate on March 25 was around 96 rubles per US dollar and 107 rubles per euro. Today the exchange rate is approximately 75 Rubles to the USD and 80 Rubles per Euro.
Recently Russia announced returning to buying gold at negotiated prices rather than a fixed value due to significant market improvements.
