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LAWRIE WILLIAMS: Russia’s CB gold reserves move marginally higher

22 Oct 2021

Russia effectively stopped buying gold for its gold reserves in April 2020.  Since then there have been some marginal pluses and minuses to the bank’s reported total gold holdings, almost always in 100,000 ounce (3.1 tonne) increments or reductions, but basically the central bank’s gold holding has remained at, or around the 2,295.4 tonnes it reports to the IMF and remains the world’s fifth largest reported national gold reserve.

Top 10 National Central Bank Gold Holdings



% of reserves**

1.      USA



2.     Germany



3.     Italy



4.     France



5.     Russia



6.     China, P.R.



7.     Switzerland



      8.  Japan



      9.  India



    10. Netherlands



Source:  IMF

The rationale behind Russia ceasing to add to its gold reserves had been taken, apparently, to alleviate the huge drop in oil and gas prices – by far Russia’s largest export earner – and the impact of this on the country’s foreign trade balance.  Russia, which is either the world’s second or third largest gold producer depending on whose figures one takes as the most accurate (it vies with Australia for that position) was able to replace the falling oil and gas export income by persuading its gold miners to sell their product on the international market instead of to local banks which had mostly found its way to the central bank.  That led to gold becoming the country’s largest export earner, with gold replacing oil and gas as such.  But now oil and gas prices have made an exceptionally strong recovery to about double the level where they were at the beginning of 2020 there is speculation, so far unsubstantiated, that the central bank may resume its gold purchases which at one time had been running at around 200 tonnes a year.

Because Russia, and reportedly China, as the major central bank recipients of new gold production, had both apparently ceased to add gold into their reserves, central bank gold buying appeared to have dipped.  However ongoing purchases from India, Kazakhstan and Turkey, plus occasional big one-off accumulations from countries like Poland, Thailand, Brazil and Hungary, have kept central bank gold reserve increases in comfortable positive territory, although apparently still below the levels of some prior years.

There have also been potential changes in Russia, although we are still uncertain if these have any significance or not.  Namely the Russian Sovereign Wealth Fund, which is controlled by the country’s central bank, is now allowed to purchase gold – a position from which it was prohibited beforehand.  If this Fund were to purchase gold then we are uncertain whether this would be reported by the central bank or not.  Potential smoke and mirrors! 

This could match the degree of obscurity over China’s true gold reserve volume.  That nation has previously admitted holding gold in accounts it feels no need to report to the IMF until such time as it feels opportune to do so.  Could Russia be starting to follow a similar path?  Only time will tell unless there is a change of policy from the central bank.

22 Oct 2021 | Categories: Gold, China, Russia, India

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