LAWRIE WILLIAMS: Russian Central Bank Gold Purchases Pick Up Again

In its latest announcement, the Russian Central Bank has stated that its gold reserves rose from 48.4 million ounces to 49.1 million ounces during August. This increase of 700,000 ounces – 21.77 tonnes – is the largest monthly increase this year and brings Russia’s total gold reserve increase year to end August to 113 tonnes according to this latest announcement and World Gold council figures for the prior seven months.  Over the same period of 2015 the Russian central bank added 109.15 tonnes, so it has been adding to its reserves at a broadly similar rate so far this year.  Last year it should be noted that it upped its gold reserve additions quite substantially in the final four months of the year to an average of 24.2 tonnes a month, compared with an average of 13.64 tonnes a month over the first eight months of the year.

We had been suggesting in previous articles that the pace of central bank gold buying might be coming down, given the low purchase levels by Russia in May and July, and a big reduction in announced Chinese purchases too, given that these two nations are about the only two whose central banks have been adding to their gold reserves in a significant manner.  Relative to its own gold reserves, Kazakhstan has also been increasing its gold holdings at an important rate, but at only around 3 tonnes a month.  But the latest Russian figure suggests we may have been premature in this assessment, at least as far as that country is concerned.  We shall have to wait another week or two to find out whether China too is reverting to earlier gold reserve increase levels, or is continuing at the slower pace seen in recent months.

On the other side of the equation – central bank gold sales – the principal seller has been Venezuela which has seen its gold reserves reduce by around 100 tonnes since the beginning of December last year.  However it does not appear to have sold any gold in July and August this year according to Swiss gold import statistics given the country’s gold sales so far appear to have been routed through the BIS in Basel, although one cannot rule out further sales during the remainder of the year.

Depending on China’s announced official purchases in the final few months of the year, perhaps our estimate of net central bank gold purchases for the full year of around 350 tonnes could prove to be an underestimate, but only if Russia continues to add at the higher rate, Chinese purchases start to pick up again and Venezuela manages to hold on to most of its gold despite its dire economic situation and global debt position.

21 Sep 2016

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