LAWRIE WILLIAMS: Russia back on gold reserve track. Adds another million.oz

After two months of adding relatively small amounts of gold to its forex reserves, Russia appears to be back on track in adding 1 million ounces (31.1 tonnes) of gold to its reserves in February according to the latest figures from the country’s central bank.  Russia, according to the IMF’s official statistics, moved ahead of China as the world’s fifth largest national gold holder in January 2018 and has extended its lead over China almost every month since – at least as far as figures reported to the IMF suggest, although officially reported Chinese gold reserve figures are thought to substantially under-represent the true picture!

With the latest addition to its reserves, Russia holds around 2,144 tonnes of gold in its fores reserves as compared with China’s 1,862 tonnes.  If the former keeps adding to its reserves at around 30 tonnes a month it could move ahead of France’s fourth placed 2,436 tonnes by the end of this year and surpass Italy’s 2,451.8 tonnes a month later!  Whether this will then be sufficient to end the country’s gold reserve building exercise, or whether it will then have Germany’s 3,369.7 tonne gold reserve in its sights, remains to be seen.

Russia has all but eliminated U.S. dollar related holdings from its reserve total as a defensive measure against current and potential U.S. economic sanction.  It would appear that expanding its gold holdings, alongside other strong currencies in place of the dollar, is an integral part of its reserve diversification policy.

We commented in a post early last year - citing one of the most accurate gold analysts, 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 has already come about with the Trump policies building resentment against the U.S. exerting its financial and military muscle in a perhaps unprecedented manner.  According to the World Gold Council 2018 was comfortably the biggest year yet for global central bank gold purchases since President Nixon took the U.S. off dollar to gold convertibility in 1971.  This has already confirmed Murenbeeld’s analysis.  And 2019 could well be another year of strong gold purchases by central banks with Russia again leading the way.

China too is now announcing monthly increases in its gold reserve at a rate of around 120 tonnes a year, while the suspicion remains it had already been building its gold reserves at at least this kind of level through the years it was reporting zero increases to the IMF.  With a track record of reporting zero monthly increases and then announcing massive rises at five or six year intervals, the past lack of transparency in Chinese gold reserve reporting lays the overall total amount reported as held open to substantial doubt.  Speculation persists that the true level of China’s gold holdings is far higher than reported which could make the IMF ‘league table’ of national gold holdings open to question.  There could well be other nations reporting ‘no change’ to the IMF while withholding sales out of, or purchases into, their gold reserves for various political reasons.  The IMF does not require national reported gold reserve figures to be independently but relies on the figures given to it so there is plenty of scope for misleading figures to be presented for whatever reason.

21 Mar 2019

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