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LAWRIE WILLIAMS: Almost there! Russian gold reserves now within 4 tonnes of China’s

Russia again added to its gold reserves in December 2017, but only by a relatively small 300,000 ounces (9.33 tonnes) bringing its total to around 1,838 tonnes.  This latest reserve rise keeps the nation in sixth place among nationally reported gold reserve holders but now only around 4 tonnes behind fifth-placed China’s officially reported holding of 1,342.6 tonnes.  That brings the total Russian increase for 2017 to around 223 tonnes – its largest-ever annual rise, compared with 200 tonne rises in each of the two prior years.

Russia’s President Putin is very much a gold believer and considers strengthening the nation’s gold reserves one of his priorities.  Along with China, whose gold reserves have remained static (officially, although there is widespread belief that it is adding to its gold reserves surreptitiously without reporting the rises to the IMF), the two nations’ official reserve figure in combination comes to around 3,680 tonnes, with only the USA holding a significantly larger amount at a reported 8,133.5 tonnes.  Indeed if some estimates of the real Chinese gold holding are to be believed, China and Russia between them may well already hold as much, or even more, gold than the USA – and recently the tenor of U.S. reserves has been called into question with the suspicion that much of its holding is not of sufficient purity to be readily exchangeable and/or have been subject to gold swaps or loans.  Hence the drive within the USA to have the gold reserves properly audited – a drive which has been resisted strongly by both Congress and the Fed – perhaps not surprising if there is any truth in the suspicions.

As we have noted beforehand, China has not announced any increase in its gold reserves since October 2016 – the month the Chinese currency (the yuan or renminbi) became an accepted constituent of the IMF’s Special Drawing Right basket of currencies alongside the US Dollar, the Euro, the Japanese yen and the British pound sterling.  In the prior 15 months China had been announcing monthly increases in its gold reserves, after a multi-year period of only announcing gold reserve updates at 5 or 6 year intervals.  We fear it may have returned to this old non-reporting pattern (See: China gold reserve increases – back to the bad old days and China’s official gold reserves level – as believable as Santa Claus or the tooth fairy.)  China is, after all, the world’s largest gold producer and Russia is vying with Australia to be the world No.2 so both are capable of building reserves out of local domestic output without impacting the global gold bullion market.

The Russian central bank has thus been the primary official buyer of gold over the past few years.  The only other significant central bank buyers in 2017, according to IMF figures, were Kazakhstan (37.6 tonnes up to November) and Turkey (149 tonnes up to October), but there were no significant national gold reserve offloaders during the year apart from Azerbaijan which appears to have reduced its gold reserves by 20 tonnes over January and February.  Others, like Venezuela may have been involved in gold swaps and gold loans which will have reduced available gold in their reserves, but the accounting rules enable them to keep showing unchanged reserve levels.  This could apply to a number of other countries too.

As we have also pointed out beforehand, the IMF relies on figures fed to it by the 100 or so countries which report their gold reserves to it.  Given that virtually all report unchanged gold reserves year-in-year-out, and with the accounting rules which enable them to ignore swaps and loans, there is considerable scope for true available reserves to differ considerably from the totals reported as being held to the IMF.  But these are the best figures we have available!  If a country wishes to falsify its reported total reserve figure, without an audit it is easy for it to do so.  There is no true transparency in gold reserve reporting.

21 Jan 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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