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LAWRIE WILLIAMS: Russian central bank still not adding to gold reserves

The latest announcement of its foreign exchange position shows the Russian central bank is still not adding to its gold reserves – a continuation of a policy that has been ongoing since last April.  Prior to that the Bank of Russia had been the largest gold accumulator among all central banks worldwide.  Interestingly its latest report on its gold holding of 2,298.5 tonnes – the world’s fifth largest reported central bank reserve - serves to emphasise the continuation of its de-dollarization policy with its unchanged gold holding now exceeding the value of its reserve of U.S. dollars for the first time.

It has been assumed that the change in policy by the central bank of ceasing to add to its gold reserves on a monthly basis had been to divert sales of the country’s newly mined gold output (it vies with Australia as the world’s second largest gold producer after China) on to the international market.  This has enabled it to substantially help maintain a positive current account balance of payments in the light of U.S.-initiated trade sanctions and the huge fall in oil and gas prices which had previously been the country’s principal export earners. 

The good recovery in the oil price, although still well off its peak, may perhaps bring this zero-gold purchasing policy to an end if oil and gas prices continue to rise.  The country’s gold holdings have served it well in terms of added value in the past 2-3 years given the rise in the gold price over this period, and should continue to do so given most experts see even higher gold prices in the months and years ahead.

Russian gold production in 2019 was estimated at some 329.5 tonnes, still well behind China’s 383.2 tonnes, but with the latter’s gold output falling in recent years by perhaps four or five percent annually, and Russia’s and Australia’s on the increase by a similar percentage, there could well be a change in the world No.1 position in two to three years if this trend continues.  It will be interesting to see the 2020 global country-by-country gold production estimates from analytical consultancies like Metals Focus and GFMS when they are published in a couple of month’s time to see if this trend is continuing. 

Australia follows close behind Russia with 2019 gold production estimated at 325.1 tonnes, while the fourth-placed U.S. follows well behind the top three with an annual output of a little over 200 tonnes. Long term top gold producer for most of the 20th Century, South Africa, has now fallen to eighth place at only some 118 tonnes.  It is no longer even the largest producer in Africa having been overtaken by Ghana which mined 142 tonnes of gold in 2019.  Any one of China, Russia and Australia could take the world top gold producer crown by the middle of the current decade.

2020 new mined gold production figures, though, could be erratically affected by measures being taken to allay the spread of the COVID-19 coronavirus, which has affected some countries more than others.  Russia has been particularly badly affected in overall virus statistics for example, and Australia less so.  However it is not yet known if, or by how much, annual gold  output has been affected.  Neither is it currently known if the COVID-19 outbreak in China had much effect, if any, on the country’s gold mining sector.

22 Jan 2021 | Categories: Gold

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