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LAWRIE WILLIAMS: Is there a pattern to Russia’s central bank gold purchases?

It has been noticeable that the gold holding increases as reported in their 20th of the month updates by the Russian Central Bank tend to be rounded figures to the nearest 100,000 ounces – hence the latest increase for June, as announced, appears as 300,000 ounces (9.3 tonnes) and that for May 700,000 ounces (21.8 tonnes) – both of which have been reported on this site.  However, these vary a little in comparison with the official IMF month by month figures (in tonnes) set out below, although the cumulative increases do end up tallying closely.

As can be seen from the official IMF figures, as reported on the World Gold Council’s website – www.gold.org – there are substantial variations in purchases on a month by month basis so, as we have pointed out beforehand one can draw few conclusions from these variances, but overall it does look as though the Russian central bank is looking to build its gold reserve base by around 200 tonnes a year at the moment. In that there was a zero increase in gold holdings in December last year is, perhaps, a confirmation of this target figure as the 200 tonne total had already been achieved in November.

Table:  Russian central bank monthly gold increases as reported to IMF (tonnes)

Month

2014

2015

2016

2017

January

-0.5

-0.5

21.4

29.9

February

7.2

0

11.1

10.3

March

-1.2

30.5

13.4

24.7

April

27.7

8.3

16.2

7.2

May

9.5

4.3

4.8

19.5

June

16.8

24.1

17.3

9.3e

H1 Subtotal

59.5

66.7

84.2

100.9e

July

10.6

13.1

7.3

 

August

7.2

29.5

20.1

 

September

37.2

34.5

16.5

 

October

18.9

18.4

40.4

 

November

18.8

22.3

32.1

 

December

20.7

21.6

0

 

H2 Subtotal

113.4

139.4

116.4

 

Full Year Total

172.9

206.1

200.6

 

Full Year Gold  Output

264.7

268.5

274.4

 

Source: IMF, Metals Focus, World Gold Council, Lawrieongold

e= estimate based on rounded central bank released figures

 

The above full year increase totals compare with Russia’s own estimated new mined gold output put by Metals Focus as 274.4 tonnes last year.  Russia is the world’s third largest gold producer, after China and Australia, and its annual output has been on the increase, as has that of Australia, while many other nations have been seeing falls.  Indeed one estimate from the Russian Union of Gold Producers suggests Russian gold output could increase to 400 tonnes by 2030, although we see that as somewhat optimistic.  But there is little doubt the nation’s gold output has been on the rise – so much for Peak Gold at least in Russia – and will probably continue to do so.  400 tonnes a year by 2030, if it can achieve this, would probably put it on a par with Wold No. 1 China where gold output, currently around 460 tonnes a year, is seen as slipping back. 

It is probably significant, in terms of state encouragement of the gold mining sector and overall gold reserves, that both the Russian and Chinese Governments appear to be firm believers that the sizes of their gold holdings will be of significant importance in their global financial status in the years ahead.

But what we can glean from the Russian gold reserve figures is that there does seem to be an overall move to add around 200 tonnes annually to gold reserves despite any other trials and tribulations within the domestic economy, in part resulting from U.S. and European economic sanctions and low oil and natural gas prices.  This remains about 60-70 tonnes below the country’s own gold output and there is the prospect that the levels of increase may rise if the country’s miners up their gold output any more.  Russia seems to be coping well with the economic sanctions which have been imposed on it by the U.S. and (perhaps more reluctantly) by the EU, and these have probably drawn it ever closer to China on the political and economic fronts and as an export market for its oil and gas.  Sanctions may even be seen to have done Russia a favour in the longer term.

At a gold reserve increase of 200 tonnes a year, if this continues, Russia will overhaul China as the fifth largest national ‘official’ holder of gold by early next year as China has been reporting zero month on month increases to the IMF ever since the yuan became part of the IMF’s Special Drawing Rights (SDR) currency basket in October last year.  However many observers, including the writer, believe that China is, in reality, still building its reserves without reporting the increases and its gold holdings are very significantly higher than the 1,842.6 tonnes it is currently telling the IMF that it has.  Indeed we believe that the country’s total gold reserves, with the additional metal held in other non-reported accounts, may well be two or three times the amount actually declared with the ultimate aim of exceeding the 8,133.5 tonnes claimed by the U.S.

05 Aug 2017

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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