A few days ago Russia’s central bank announced it would buy domestic gold at RUB5000 per XAU gram until June 30. The announcement was largely ignored due to the lack of peace agreement traction and the weak levels of USDRUB above 100.After all who would sell gold at that level

However, optimism has increased significantly this week about a possible escalation in Ukraine. USDRUB has moved down to 84, which translates to a gold floor of $1850. As a reference, USDRUB at 81 translates to a floor of $1920; the pre-invasion level of USDRUB at 75 translates to a floor of $2050, and the November 2021 low of 70 for USDRUB translates to a floor of $2220.

It would be very interesting to see if the CBR commitment remains intact.

Many unknowns remain about how an onshore and offshore RUB would counteract this, if at all, but this would appear to be the first attempt at an indirect gold peg since the demise of Bretton Woods in the early 1970s. The gold market should take notice of the appreciating RUB.

It should be noted that the selloff in gold overnight down to 1890 stopped right ahead of the implied Russian XAU peg against USDRUB. It is likely the XAU market will monitor RUB in tandem going forward

Heavy USDJPY Selling

There was heavy USDJPY selling into the 0955 Tokyo fix, no doubt related to fiscal year-end activity by locals given that Eurodollar futures are stable. This spot price action is easing the overbought nature of USDJPY, though a reversal is yet to be confirmed until 122.00 is broken.

Recently, the dominant driver of USDJPY has been the impulse from Fed policy, while yen short positioning has expanded, although it still remains below the late 2021 levels.

From Stephen Innes, Managing Partner at SPI Asset Management