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LAWRIE WILLIAMS:Russia buying more gold than China. 21.8 tonnes in Dec.

With an increase of 21.8 tonnes in its gold reserves in December, Russia continues to build its central bank bullion holdings - largely through buying in its most of its own domestic production.  Russia was the world's third largest gold producer (after China and Australia) in 2014 in producing 266.2 tonnes - only 6 tonnes less than Australia.  It will be interesting to see whether it will have hit the No. 2 spot in 2015 when the full year figures are made available.  As in Australia, Russian gold miners have benefited from the domestic currency's fall against the U.S. dollar.  The gold price has actually risen in the Russian ruble, despite falling in the U.S. dollar, which makes the economics of gold mining there rather more favourable given most of the input costs are incurred in rubles, while income comes in in U.S. dollars.

The December increase in the Russian central bank's gold reserves brings the rise year on year to 208 tonnes.  Over the past six months, Russia has added 139.6 tonnes to its reserves as against 103.9 tonnes by China (the latter has only been reporting its month by month figures since July).  As noted in a recent article on lawrieongold (China and Russia between them account for close to 90% of all announced central bank gold purchases - See: Central bank gold purchases holding up – but only 3 significant regular buyers).  Both have an intent to build up their gold reserves believing they will consolidate their positions in any new global financial order which may develop over the next few years.

With China's somewhat erratic reporting history with respect to its gold reserves, many believe its holdings are rather higher than it has been reporting to the IMF.  From the latest IMF figures, China's gold reserves totalled 1,722.5 tonnes - the world's 5th largest, but hugely behind World No. 1 - the U.S. - which has been reporting an unchanged total of 8,133.5 tonnes for many years.  Russia comes in at No.6 among world gold holders with the latest IMF reported figure of 1,370.6 tonnes.  Both of the Chinese and Russian figures were reported prior to announcements of December increases.

There is a view that China, in particular, has a long term aim of increasing its gold reserves to at least match those of the U.S. and given that its current reported reserve level is so far behind that of the U.S. many analysts believe its true gold holdings continue to be substantailly understated by holding a major part of them in some other government account which is not reported to the IMF.

Be that as it may, Russia and China are, in reality, the only regular truly significant monthly announced purchasers of gold and between them are accumulating the yellow metal at around a combined 400-500 tonnes a year.  It is generally anticipated that given their governments' views on the place of gold as a global financial instrument they will continue raising their reserves at a similar rate in 2016

21 Jan 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

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