LAWRIE WILLIAMS: Russia's January gold reserve increase much higher than previously reported

Contrary to reports elsewhere, which put an increase in Russia’s gold reserve in January at some 13.6 tonnes based on the apparent announced dollar value of the rise, the actual figure as reported to the IMF was 700,000 troy ounces (21.8 tonnes). This is very much on a par with the high levels recorded in the second half of last year.  Some will see the figure as particularly significant in terms of the likely continuation of a high level of central bank gold purchases this year, with China already having announced that it increased its reserves by 16 tonnes in the same month.  Together the two central banks therefore will have accumulated 37.8 tonnes in January – a level which, if maintained over the year would see a further 450 tonnes plus move into the forex reserves of these two nations alone this year. 

What might also been seen as significant is that Russia, for the previous two years, has tended to add little to no gold to its reserves in the first two months of the year, suggesting that the Kremlin is now going all out to bolster its gold reserve levels, perhaps by buying up all or most of its own domestic gold production.  Russia is, according to the latest GFMS estimates, currently the world’s third largest producer of gold at a rate of around 22 tonnes per month, so the figure would tally with this suggestion.  However other estimates put the country’s gold output figure a few tonnes higher, possibly moving it into second place ahead of Australia.  We will see when official figures for the world’s gold producing nations are announced.

Additionally, it is perhaps also interesting note that, due to Russia’s currency collapse against the US dollar, in Ruble terms the gold price is close to an all-time high at around RUB95,000 – about 75% higher than it was back at the time of its US dollar peak in 2011.  This tends to make the economics of gold mining in Russia far more favourable than it is in say China and the USA other nations.  Currency movements put gold also at, or close to, an all-time high in such other major gold producing nations as Australia, South Africa, Canada, Brazil, Ghana and Argentina.  With many cost input figures incurred in the domestic currencies, but the revenue still received at the global US dollar gold price, this has been a significant factor in global gold output remaining at around its peak levels despite the yellow metal’s falls in the US dollar gold price, which most analysts focus on to the exclusion of other factors.

21 Feb 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