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LAWRIE WILLIAMS: Russia adds another 18.7 tonnes of gold to reserves

Russia continues to diversify its forex reserves reducing ever further its reliance on the U.S. dollar and an integral part of this policy is to further expand its gold holdings.  In May, for example, Russia added another 600,000 ounces of gold (18.66 tonnes) to its reserves bringing them up to 1,928.4 tonnes.  At the current rate of increase they will surpass 2,000 tonnes by September and be challenging France, the world’s fourth largest national holder of gold, within a couple of years.

Russia is nervous about Forex assets held in the USA being frozen by a hostile government – a position perhaps justified by the recent freezing of some $22.6 billion of assets belonging to the Kazakhstan Sovereign Wealth Fund and held by the Mellon Bank in the U.S.   While this appeared to be due to civil proceedings, recent reports suggest that this freezing of assets was at the behest of the U.S. government as leverage to gain access by the U.S. military to two Kazakh ports on the Caspian Sea.  Whether this is true or not it illustrates the risks for any nation to hold significant assets in the USA.  If the reports are true then, as Ed Steer reports in his daily newsletter, the move was nothing short of extortion by the U.S. authorities which, under the Trump administration seem to be moving towards a much more aggressive foreign policy.  Kazakhstan is obviously aware of these potential prospective difficulties and is another country currently adding to its central bank’s gold reserves on a monthly basis, albeit at a much smaller rate than Russia, but then its economy is a fraction of the size.

Another former Soviet satellite state, the Kyrgyz Republic, is also highlighted as having been increasing its gold reserves, as has Turkey – another nation which seems to be on something of a collision course with the U.S. over its policy towards Russia.

We commented earlier, citing Dr Martin Murenbeeld, that the U.S.’s aggressive foreign policy stance – in this respect over trade tariffs – was likely to drive other central banks to increase gold reserves and reduce their dependence on the U.S. Dollar as a reserve currency to the long term detriment of the U.S.  This may already be beginning to happen with the  Trump policies building resentment against the U.S. exerting its financial and military muscle in a perhaps unprecedented manner.

Russia and China may well be building an alliance against U.S. dominance and as resentment builds they may increasingly attract other nations into their camp.  Global politics isn’t necessarily like business where financial elements tend to come to the fore.  There are other agendas involved and the U.S. may well be on a path to finding this out.

21 Jun 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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