LAWRIE WILLIAMS: Russian central bank still adding to its gold reserves
Unlike the other big central bank buyer of gold, China, Russia is continuing to add to its gold reserves and reporting its increases. China has not reported any reserve increases since last October, but the general belief is that it is almost certainly adding to its gold reserves big time regardless and only reporting its increases when it deems it opportune to do so. Certainly known gold flows into the country, together with its own gold output as comfortably the world’s No. 1 gold producer, suggests this as China’s estimated gold consumption probably only accounts for around half of that being absorbed by the country on an annual basis, and this disregards any gold being imported from unknown sources that may not find its way into official data.
In June Russia added a further 300,000 ounces (9.33 tonnes) of gold to its reserves according to the regular monthly statement of its gold holdings by the Russian Central Bank. This brings its current total holdings to some 1,716 tonnes – still the world’s sixth largest national holding as reported to the IMF – and continuing to close the gap with the official Chinese figure of 1,842.6 tonnes. The June additions are much smaller than those reported for May (700,000 ounces or 21.8 tonnes), but more than the 6.2 tonnes it added in April. Russian gold reserve additions do fluctuate on a month by month basis, but recently it has been adding to its gold reserves at around 200 tonnes annually. For H1 2017 the total to date is 100.9 tonnes so the nation is right on track to add a similar 200 tonne amount to its official gold reserves in the current year.
As we noted here a month ago, China has a track record of non-reporting of its reserve increases. Thus, as noted above, we don’t believe the Asian giant has ceased adding to its gold reserves at all and is holding these additions in accounts which it is not reporting until such a time it may feel politically, or financially, advantageous to do so. It has done this in the past only reporting big increases in its reported reserves at five or six year intervals. We suspect it has not yet reached its ultimate gold reserve target and one theory is that it considers it advantageous to continue the pretence that it has ceased buying gold as a device to keep the gold price suppressed in order to continue to adding to reserves at lower prices. We see as significant the fact that it only reported monthly additions to reserves in a 17 month runup period to the yuan (renminbi) being accepted as an integral part of the IMF’s Special Drawing Right (SDR) basket of key currencies (which also includes the US dollar, the Euro, the Japanese yen and the British pound sterling) which was finally confirmed in October last year. Ever since then, China has been reporting zero increases in its reserves on a monthly basis. We don’t think this is coincidental.
We noted also a day or so ago that Australia, the world’s second largest gold producer (just ahead of Russia itself in third place) has been sharply increasing its gold exports to mainland China and Hong Kong with a big new record Q1 figure (See: World No. 2 producer Q1 gold exports to China huge new record). Both China and Russia appear to see value in building up their gold reserves as a key element in cementing their respective positions in the global financial hierarchy.
21 Jul 2017