LAWRIE WILLIAMS: Russia still coy on its gold reserve position
The Russian central bank announces updates to its foreign reserve positions, including any additions to, or sales from, its gold reserves on the 20th of each month, but since the start of its invasion of Ukraine it has not been giving out any details of this information. It had been going through a period of not adding to reserves, but had announced that this would be coming to an end in April this year, but the Ukraine war has since intervened. Prior to its reserve addition hiatus it had been increasing its gold holdings by around 200 tonnes a year.
Given that Russia is the world’s second or third largest gold producer with annual output of around 320 tonnes a year, the likelihood is probably that it has most recently been utilising its gold to help finance its ongoing war effort, assuming it is finding a market for its output. There certainly are some nations known to be gold accumulators which are willing to take on Russian gold without publicising that they are doing so which, if known, might incur the wrath of the U.S. and the European sanctions imposing nations.
China is a particular case in point. It has made no secret that it considers Russia a strategic ally and there have long been suspicions in any case that it has surreptitiously been building its own gold reserves which are believed to be considerably in excess of the 1,948.3 tonnes it reports to the IMF. China, along with Russian and the other BRICS nations has been pushing for the development of a new global reserve currency to replace the U.S. dollar which might be more attractive to many nations given how much the purchasing power of the dollar has diminished over the decades. One theory is that gold would indeed play a stabilising role in the make-up of such a currency.
To back up the China theory, from time to time the nation has announced significant increases in the size of its gold reserves, claiming that this additional gold has been held in accounts which are non-reportable to the IMF. How much more gold, if any, is held in such similar accounts remains unknown.
This, of course, raises the question of the accuracy of all, or any, of the gold reserves reported and regularly published by the IMF. The amounts are not audited and it is certainly possible that some of these reserves are under- or over-reported for whatever reason. Too many government-released statistics nowadays are known to be falsified or exaggerated for various political or economic reasons for all these IMF figures to be taken as accurate without some degree of scepticism. Such is one’s lack of trust in political institutions nowadays! It is certainly not inconceivable that there are other nations out there buying Russian gold and not reporting it until it suits them to do so – particularly if the gold is offered at a small discount to the market price.