LAWRIE WILLIAMS: Russia adds still more gold to reserves

In August the Russian central bank added yet more gold to its reserves  - another 500,000 ounces (15.6 tonnes) to be precise - thus still closing the gap on China to less than 100 tonnes as far as officially reported figures are concerned. The latest additions bring Russia’s total gold reserve to around 1,745 tonnes as compared with China’s 1,842.6 tonnes as reported to the IMF, although we believe the true China figure may be considerably in excess of this total, with the latter country having reported zero additions to its reserves for almost a year now. 

So far this year Russia has added just short of 129 tonnes TO ITS OFficial gold reserve figure.

We reckon also that the officially stated China total, back when it last reported its gold reserve tonnage to the IMF, very considerably understated its real reserve position.  The country has a long track record of reporting static gold reserve numbers for periods of five or six years and then updating them when it sees fit, but is even then also still widely believed to be substantially understating its true gold reserve figures.

One theory here is that if China reported the real level of its gold reserves this would give a big boost to the gold price and it prefers to keep this price under control until is full target gold reserve is reached.  There is speculation that this desired reserve level may well be upwards of 8,000 tonnes to match the USA’s reported gold reserve of 8,133.5 tonnes.  Given that China is reported to be setting up a process to pay for its oil imports in yuan, and then making these yuan payments redeemable in gold on Chinese exchanges, building a larger gold reserve makes considerable sense, particularly as U.S. Treasury Secretary Mnuchin has threatened to cut China off from the dollar financial system.

Both China and Russia appear to be believers in the value of gold in an era where the U.S. dollar’s power as THE global reserve currency may be beginning to wane.  Gold does not carry the same kind of counterparty risks that fiat currencies do, and is acceptable as money virtually the world over.

Russia has now been adding annually to its central bank’s gold holdings for around 10 years now and recently at the rate of around 200 tonnes per year and is on target to add a similar amount this year too.  Along with Kazakhstan, which has been adding around 2-4.5 tonnes of gold a month to reserves, it is one of the few nations reporting consistent gold holding increases on a month by month basis, but there is speculation that others may be adding to reserves too – notably China as mentioned above.  Turkey is another country which has seen some big reserve increases, but these figures are somewhat anomalous as the country includes commercial bank holdings in its total reserve figure, which makes its total more volatile.

 

23 Sep 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