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LAWRIE WILLIAMS: Russia’s gold reserves could overtake China’s this year

According to the official announcement from the People’s Bank of China, the country’s gold reserves  remained unchanged in February and at the current rate of gold reserve building, Russia could well overtake China as the world’s fifth largest national holder of gold by the third quarter of this year.  China seems to have entered a hiatus period of gold reserve building, while Russia has been reporting strong increases in its gold holdings month by month.

According to the IMF and Russia and China’s own statistics, Russian gold reserves are only around 200 tonnes lower than those currently officially reported by China.  For the latest month, as reported by its Central Bank, Russia added 31.1 tonnes to its gold reserves in January, bringing them to around 1,645 tonnes as against China’s figure of 1,842.6 tonnes, so if the latest purchase levels are repeated for the next 7 months, then Russian gold reserves could overhaul those of China by the start of the fourth quarter of the year. (See: Russia ups gold reserves by another 31.1 tonnes .)

Of course all this supposes that the reported gold reserve increases as announced by the two nations’ central banks are themselves accurate.  At the moment we have no reason to doubt the Russian figures – the reported reserve build-up tallies quite well with known Russian gold output and the proportion of this believed to be taken on by the state.  The country is the world’s third largest gold producer, after China and Australia, with annual new mined gold output of around 260 tonnes, and has been vying with the latter for the No. 2 position. 

But as for China, although it has been officially reporting monthly gold purchases since July 2015, it does have a track record of holding gold in non-reported accounts and only announcing these as part of its gold reserve at five or six year intervals. It had been assumed that this policy may have fallen away since the country started announcing its monthly gold reserve increase figures – but who knows?  According to IMF statistical data China only added 19 tonnes of gold to reserves in the second half of last year (hugely down on the previous 12 months’ monthly additions) – and none at all since the end of October.

According to statements from government officials, analysts and academics, both China and Russia see gold as an important element in the global financial system.  China has reportedly called for gold to be included in the basket of currencies which makes up the IMF’s Special Drawing Rights (SDR) – some will argue that gold, in effect, should be treated as a currency, others will disagree!  Certainly Russia’s President Putin is a gold believer.  The Chinese hierarchy is perhaps a little more circumspect in its open support for gold, but both nations are keen to see the US dollar dominance of world trade – particularly with respect to oil and gas – depleted and see gold as one of the tools for helping them achieve this objective.

07 Mar 2017

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

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