LAWRIE WILLIAMS: Russia may have to sell gold to boost current account
A report in Pravda suggests that the lower oil prices and the implementation of Western sanctions in particular have been having a particularly adverse impact on Russia’s current account and it may now become necessary to sell some of its gold reserves and diamond stocks to counteract a growing deficit.
Regarding gold, Russia is vying with Australia to be the world’s second largest producer of the yellow metal – indeed some projections suggest it could become the world’s largest gold miner within the next ten to fifteen years. The Russian Central Bank has also been the world’s largest official gold buyer in recent months. It is also the world’s no. 1 producer of diamonds mining around 25% of the global total.
Now whether this reported necessity to sell gold and diamonds is going to affect the country’s foreign reserves is not certain from the report. We seem to recall a similar statement a couple of years ago, but since then Russia has continued to buy gold for its reserves – indeed it is reported to have taken 15 additional tonnes into its Central Bank holdings in September, bringing the total to around 1,540 tonnes, worth around US$63 billion at current gold prices. This is the world’s sixth largest national official gold holding.
We will need probably to wait another 3 weeks or so for any official confirmation that Russia may be starting to dip into its official gold reserves to help reduce debt, or perhaps cutting the level of its central bank’s gold buying, or finding the gold from other stockpiled sources. Russia currently mines around 22.5 tonnes of gold a month.