According to the World Bank, the gold price is expected to increase by 3.3% by 2022. However, the World Bank warns that the price could fall sharply if Russia’s central bank makes large-scale offloads.
Russian Factor
After the price of gold surged past the $2,000 mark in early March, a new World Bank report now predicts the commodity’s value will only grow by just 3% in 2022. The bank, however, said it expects prices of commodities like food — which have risen by 84% — and crude oil to stay elevated for much of 2022.
Some gold enthusiasts have said that the price will rise to an all-time high. However, according to the World Bank’s report, it is more likely that the price will fall sharply in 2023. One factor likely to lower the price is Russia’s possible offloading large amounts of gold.
“In the longer term, gold prices could be affected by the Bank of Russia’s policies, and should it engage in large gold sales, prices could drop materially,” a report quoting the bank’s latest forecast document has said.
When Russia, which has been cut off from the global financial system, resorts to selling large quantities of gold as a way to raise funds, the resulting supply glut will likely cause the commodity’s price to drop.
Reports suggest Russia might consider backing its currency in gold. While it’s not yet clear when this will likely happen, the prospect of a large country backing its currency with gold may well indicate the commodity’s price will likely rise further.
The Return of the Gold Standard
It is now possible that Russia could return to the gold system. The debate has also been rekindled about the utility and feasibility of crypto tokens that are gold-backed. Although many tokens of this nature have been created, only a handful actually work. Many reasons have led to the failure of some crypto tokens that are gold-backed.
Bitcoin.com will help you find out more information on why certain crypto tokens backed by gold have failed and how the future looks. News reached out to Tony Dobra who is a veteran in precious metals and an advisor non-executive at Aurus, a fintech startup. He has a total of 40 years of experience. Below are Dobra’s written responses to questions sent to him via Linkedin.
Bitcoin.com News (BCN). Gold has been moving up since the Ukraine-Russia War, but the price is still below $2,100 despite predictions that it will surpass $3,000. Is it possible for gold to reach $3,000/ounce over the next five year?
Tony Dobra (TD):The volume of gold trading is at an all time high. While the gold price fluctuates, it is under pressure right now. Forecasting the price is like reading tea leaves dregs or goat entrails. It is not science, but a game. The long-term situation in Ukraine and what is in bedded should lead to gold reaching $2,100 this year. Everything is possible once that happens. My guess is $3,000 would be more common than not.
BCN: Do cryptocurrencies now seem less appealing for investors due to the recent resurgence in gold?
TD:Both are distinct markets that should be attractive to investors. It’s good to have diversity. It is wise not to invest in products moving at the same time. Is that a good way to diversify? Most big investors prefer a portfolio with uncorrelated products, according to me.
BCN: Let’s talk about a digital token/currency that is backed by gold. We have seen a lot of gold-backed tokens but it’s fair to say a lot of these have failed. Are you able to identify the reasons these tokens have failed?
TD:Many of these products failed. The two most common are that either they’ve been set up by digital experts without nuanced knowledge of the gold market, or conversely, by gold traders that don’t hire the right digital skillset. Both cases are indicative of a lack in total knowledge by seasoned investors. The same applies to both young crypto investors and ultra-conservative, old-school investors. It’s all about being comfortable with the product.
BCN: Tell us about what you are doing that will convince others your token can succeed in places where they have failed.
TD:Aurus was started by digitally-savvy traders who had enough knowledge and skills to understand their limitations. They also have the ability to find the right people to fill those gaps. The Eco-system includes all elements that make a market efficient, such as vaults and refiners, traders and investors, as well service providers, technical support, and service providers.
Interestingly enough, professional traders don’t just make their living by selling and buying. Instead, they profit from volatility. If the price fluctuates in any direction, then it generates supply-demand and trading opportunities. This knowledge was used by Aurus to develop the AWX token. The token generates income through a lower percentage of transactions in the ecosystem. The AWX token is worth more if there are more transactions than it receives.
BCN: Many prominent figures believe that bitcoin can be considered a digital version of gold. Others suggest that gold may lose its place as the best alternative to fiat currency in uncertain economic times. However, the events of recent weeks show that gold remains a valuable asset and a reliable investment. Is it possible that bitcoin could become the preferred alternative store for value and overtake gold?
TD: Another ‘can you gaze in your crystal ball question’. Bitcoin (BTC) is the currency of Utopia in an ideal world. There would be no wars, crime or inflation. A few gold coins are an advantage in a world that has many people being forced from their homes and without reliable electricity, and where governments are hacking networks and sponsoring hackers. After direct bartering, gold is the most fundamental form of trading. Is it worth the instant value of an iPhone without a battery? Gold is considered a historical relic. However, are we making progress towards an equal and more peaceful world or are we going backwards to war and hunger?
BCN: There have been reports that Russia could back its currency using gold after it was hit with sanctions. Do you think it’s possible for Russia to back its currency with gold?
TD: It’s not so much ‘possible,’ but probable. Russia’s precious metals are also abundant, just like energy commodities. Its now favored trading partners, China and India are the world’s two biggest buyers of gold, followed by their friend Turkey. Their new partners will be more confident if the ruble is backed by gold. This will help to create non-U.S. dollars trading blocks.
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