I did some research on this by looking at the output there in classic. It is indeed ruler name. Specifically, ruler name of the region you are in.
Regarding the use of the macro in the talk window as reported by OP: this is a negative response from nobles in general, not just King Gothryd. Therefore, it will look odd for this particular NPC because Gothryd is saying he's friends with himself.
I was not able to trigger this response in classic because there seem to be two kinds of negative responses: initial and follow-up. Follow-up responses don't show up in classic, you get one response and then endless "I don't know" stuff. I'm guessing it's a bug or something DFU corrected?
Anyway, the mage quest window was the only place I could see it in classic. Here are some results I got per region [%rt] [%rn]:
Note that according to UESP, smaller regions don't have named rulers, so I have no idea where the macro is grabbing these names. I do know that the name never changes, though. I went to other cities and the same name came up.
Also note that for large regions, the title is included in the name string for those NPCs, which results in title repetition here.