LAWRIE WILLIAMS: Russia ups gold reserve increase in Feb

The Russian Central Bank has just published its latest gold reserve information showing it has added some 400,000 ounces (12.44 tonnes) of gold to its reserves in February.  This is double the amount it added in January when it was thought the nation might be cutting back its gold purchases this year.  However this latest purchase suggests that the nation may still be on the path to adding perhaps somewhere between 100 and 200 tonnes in the full year – perhaps a similar increase to that reported last year of around 158 tonnes.

The addition takes its gold reserves to around 2,292 tonnes – only around 144 tonnes less than the world’s fourth biggest national gold holder – France.  At this latest month’s rate of increase Russia could match, or even overtake, the French holding within the next year.

Table:  World’s top 10 gold holders

   

Tonnes

% of reserves**

 

1

United States

8,133.5

77.9%

 

2

Germany

3,366.5

74.0%

 

3

IMF

2,814.0

   

4

Italy

2,451.8

69.3%

 

5

France

2,436.0

63.6%

 

6

Russian Federation

2,292*

21%*

 

7

Mainland China

1,948.3

3.1%

 

8

Switzerland

1,040.0

6.2%

 

9

Japan

765.2

2.9%

 

10

India

635.0

7.0%

 

*Estimates

The reason we quote the Russian figures as estimates is because the monthly Russian central bank gold reserve announcements are reported only as rounded amounts and may differ from the more detailed figures as reported monthly to the IMF.  For example the January figure this year as announced by the central bank a month ago was 200,000 ounces (6.22 tonnes) yet the amount reported to the IMF, according to figures from the World Gold Council, was 8.1 tonnes!

Thus Russia has been able to build its gold reserves substantially over the past few years while reducing its U.S. dollar related holdings down to an absolute minimum.  As we reported last month this is due to fears that the U.S. might impose financial sanctions and freezing Russia’s dollar assets.  The U.S. has shown its willingness to conduct financial warfare of this type against other states it feels are hostile to it (like North Korea and Iran), but Russia reckons now that it won’t be worth the U.S. making this kind of move against it if there is little in the way of U.S. related assets to attack.

Whether Russia can keep up its current rate of gold reserve purchases for the foreseeable future given the enormous fall in the oil price – oil and gas are the nation’s biggest export earners – remains to be seen. So next month’s announcement on gold reserve increases, if any, from the nation’s central bank will be awaited with particular interest.  However the oil price fall is partly self-inflicted with Russia’s decision not cut oil deliveries in the light of a global over-supply situation, which in part may well be aimed at putting U.S. shale oil producers out of business by making their operations uneconomic.

Overall though, the Russian central bank policy of increasing its gold reserves virtually every month for more than 10 years now, looks to be paying off well, particularly if pundits predictions for the gold price to take off as the world dives into recession come about.  In any case it will probably have been a better choice for a nation’s reserves than the Swiss National Bank’s purchases of equities which will have crashed in value enormously over the past couple of weeks.  The gold price may have come down year to date, but only by around 1%, whereas the Dow is down by 36%.

 

 

21 Mar 2020

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).

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