Russian central bank gold buying back with a vengeance
Russia has announced a 1 million ounce increase in its gold reserves in March so is back on the gold buying trail in a big way.
According to a Russian central bank announcement on its latest gold reserve position it appears that it added 1 million ounces of gold (31.1 tonnes) to its holdings in March after a two month hiatus, bringing its total reserves to 39.8 million ounces (1,237.9 tonnes). There had been speculation that the nation had been cutting back on its gold purchases due to the economic difficulties it had appeared to face due to the falling oil price and western sanctions. However the lack of any increase in the early months of the year is a pattern we have seen before – but now the March rise is the highest seen since last September when the bank added 1.2 million ounces (37.3 tonnes) which itself was the largest monthly total in 16 years. The big March gold reserve rise could thus be a signal that the Russian central bank is strongly back on its gold buying spree.
Russia may, in this way, be trying to demonstrate to the West that sanctions are just not having much, if any, effect on the domestic economy. Indeed it could also be trying to influence some of the more reluctant European nations, which have been calling for sanctions to be relaxed because they may be hurting them more than the target nation through loss of significant trade, and thus create divisions in the united sanctions imposition. That Russia’s economy is more resilient than the sanctions imposers may have thought has also been seen in a strong recovery in the Russian ruble which has rebounded 24% from its almost 70:1 low point against the dollar of February, although it is still some 30% plus down against the greenback on its level of mid 2014. But an important proportion of this will also have been due to the strength of the dollar against most other currencies over the same period.
The news of the latest Russian gold reserve addition confirms the World Gold Council prediction that overall central bank gold reserve rises will continue at a strong rate this year – and there is also speculation by Bloomberg that China may also confirm a big rise in its reserve by as much as 2,500 tonnes or more in the months ahead as it jockeys to try and have the yuan accepted by the IMF as a part of the make-up of a revised Special Drawing Rights basket – although as we have pointed out here before this is something which could be vetoed by the US as not being in its interest given its 16.75% blocking voting interest in significant IMF decisions.
Russia’s central bank’s strong gold buying pattern in recent years – it bought around 150 tonnes last year and 77 tonnes in 2013, is being seen as a potential geopolitical weapon and a way of adding credibility to its currency position. This is in the face of what it sees as a major attack on it by the US-led West over its moves seemingly designed to destabilise the new Ukraine government and persuade it not to link up with the EU and NATO which it sees as a threat to its security |
