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Russia's Central Bank Increases its Gold Holdings

Russia has overtaken China as the fifth largest gold holder in the world. This is based on the data that was shown in February, 2019.

With Vladimir Putin’s support, Russia has heavily invested in bullion via its central bank. Gold is often considered to be a natural hedge or safe haven, particularly against the US dollar. The move is likely a result of US sanctions against the country, and an effort to reduce the country’s Dollar dependence.

Because of the sanctions on Russian entities issued by Washington in April, 2018, overall treasury securities held by the Russian central bank were reduced. 2018 has been the most difficult year for Russia financially since 2018, when Crimea was annexed from Ukraine by Moscow.

In 2018, about 8.8 million troy ounces of gold were bought by the Central Bank. This broke the previous record of 7.2 million ounces purchased in the year 2017.

At the start of 2019, about 67.9 million ounces of gold were held in Moscow by the Central Bank. This went up from 59.1 million, which was held at the beginning of 2018. As a result of this, Russia ended up as the 5th largest gold holder after France, Italy, Germany, and the United States.

China is currently in sixth place. This is because an increase in its gold reserves has been reported only once over a two year period. China’s holdings rose to 59.6 million ounces from 59.2 million ounces, which is significantly less than the rise experienced by Russia. In December 2018, the reserves of China were reported at 59.6 million ounces. Hence, China’s gold reserves have remained more or less constant.

Based on industry sources, Russia’s Central Bank was focusing on gold because of the US sanctions. Russia cannot be blacklisted from buying gold, and its domestic gold holdings cannot be frozen.

Russia appears to be diversifying from US based assets.

According to Putin, the US Dollar’s monopoly is not something that can be relied on. In fact, it is quite dangerous.

The Central Bank in Russia is currently buying up all domestically produced gold. The extent and scope of these purchases has not been disclosed by the state. There is no indication whether their gold holdings will continue to rise with the same speed of 14 percent per annum in 2019.

Most of the gold produced domestically by Russia has been bought by the Central Bank. Russia’s gold production is rising, but at slow rates.

According to the latest data by the Finance Ministry in Russia, about 8.5 million ounces of gold was produced by Russia in between October and January in the year 2018.