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LAWRIE WILLIAMS: Russian CB adds another 28 tonnes of gold in October

Russia is continuing to add strongly to its gold reserves with its central bank announcing it bought another 28 tonnes of gold for its reserves in October.  That brings the year to date total to around 227 tonnes – already substantially more than it has bought in previous calendar years with a couple of months to go!.

This gold accumulation has taken place while U.S.-imposed sanctions are in force and as a counter measure Russia has reduced the dollar-related part of its forex holdings to the bare minimum and is, no doubt, following a policy to replace this part of its reserves with other key currency-related holdings and with gold.  As the world’s third largest gold producer – and it is vying with Australia for the No. 2 spot – it has no problem in buying gold from its domestic gold mining companies.  The latest purchases bring its total gold holding to around 2,065 tonnes – the world’s fifth largest reported national gold holding after the USA, Germany, Italy and France, and is closing ground on the latter two fast.  We say ‘reported’ holding as we have long expressed doubt on the official Chinese figure of 1,842.6 tonnes – the figure which it has been reporting to the IMF for two full years now.  Followers of the gold market will no doubt remember that China has a track record of reporting zero increases in its gold reserves for several years and then announcing a very big increase, doubtless accumulated over the non-reporting years, and there is even speculation that these then-reported totals substantially understate the nation’s true holdings.

Other central banks have also been increasing their gold reserves on a fairly regular basis this year.  These include Kazakhstan, India, Mongolia, Kuwait, Qatar and Turkey and the World Gold Council is looking for overall central bank purchases this year to be the strongest for some time.  All this is adding to overall gold demand at a time when newly mined production is plateauing, or perhaps even turning downwards (peak gold).  Once the anticipated decline sets in it is likely to accelerate as exploration for gold has sharply diminished over the past three years or so as mining companies have mostly been cutting costs.  Major capital projects are also few and far between as banks have been loath to lend on mulyi billion dollar projects any more.

22 Nov 2018 | Categories: Gold

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