This year, no central bank or central government has bought gold at a more vigorous pace than the Russian central bank. It has significantly added to its gold reserves in 2016, and this trend has continued.
September saw Russia grow its gold reserves by 500,000 troy ounces (15.55 metric tonnes). Year-to-date, the central bank has increased its gold holdings by 125 tonnes, bringing the total 7% higher to 1,542 tonnes. When the International Monetary Fund (IMF) is excluded, Russia boasts the sixth-largest gold reserves of any nation (behind China, France, Italy, Germany, and the United States).
In fact, over the past seven years, the Central Bank of the Russian Federation has far outpaced the People’s Bank of China (PBOC) in official gold purchases, 895 tonnes to 770 tonnes. A fair amount of attention is paid to the rapid pace of growth of China’s gold reserves, but for years Russia has been the world’s largest gold-buyer.
Accelerating Russian Gold Reserves
During September, Russia added a half-million troy ounces of gold to its reserves. The 500,000 oz was actually only tied for the sixth-most in any month this year. According to reports, Russia’s central bank is actually purchasing gold 50% faster than China over the last 12 months.
Just since the middle of 2014, Russia has added over 400 tonnes of gold bullion to its foreign reserves. During much of that time, the central bank has also been “de-dollarizing” by cutting its U.S. Treasury holdings. The Russian central bank holds $88.2 billion in Treasurys—up from $66.5 billion in April of last year but still down significantly from $131.8 billion in 2014.
All told, the value of Russia’s gold ($52 billion) now accounts for 15% of all its foreign reserves. Like China, Russia has also been retaining a larger portion of its domestic gold mining production rather than exporting this gold output like any other raw material. Low crude oil prices aren’t helping the energy-export-dependent Russian economy, however.
It’s obvious that, much like the Chinese, Russia’s monetary policymakers are interested in diversifying away from the dollar as much as possible. Many commentators have noted that the IMF’s acceptance of the Chinese renminbi (yuan) into the Special Drawing Rights (SDR) basket was in part due to rising confidence and trust in China’s financial system. Undoubtedly, a large stockpile of gold reserves factors into that determination. In some ways, it only makes sense: Other developed, wealthy nations like the U.S., France, Germany, Japan, Switzerland, and the U.K. are all also in the top 10 in global gold reserves.
Russia could be pursuing a similar strategy. There’s been some tongue-in-cheek speculation that Russia could introduce a gold-backed ruble as soon as next decade. At any rate, it’s clear that the country intends to strengthen its financial position in the global economy with the safety and reliability of gold.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.