Today at the gathering of world financial leaders both private and government in Davos, Switzerland, the First Deputy Chairman of the Russian Central Bank announced that Russia would continue to buy gold for their central reserves. Deputy Chairman Alexi Ulyukayev, who is under consideration by Vladimir Putin to be the next head of the Central Bank, told reporters “We are buying metal and will continue to pursue this course. This is a course of asset diversification in a situation when investing in securities or deposits remains risky.”
At nearly 950 tons, Russia is currently believed to hold the 4th largest gold reserves of any nation (China does not report central bank gold purchases reliably.) Russia bought 80 tons of that last year, and experts say they plan to buy the same amount this year.
Russia has a large amount of foreign currency reserves from the sale of oil and natural gas, which is traded in dollars, and is feeling insecure about the continued value of not only the dollar but the euro as well. Petroleum exports help Russia run a budget surplus, which it holds in emergency funds to guard against economic shocks. $30 billion was added to these funds last year alone.
Ulyukayev, who is head of asset management for the Russian central bank, accused Japan of “protectionist monetary policy” in its efforts to devalue the yen. Japan is engaging in a new round of aggressive quantitative easing which it hopes will increase its exports and lift it out of recession. With the U.S., European Union, and Japan all engaging in large scale quantitative easing, accusations of instigating a “currency war” between trade competitors is heating up.
Ulyukayev said that 46% of Russia’s forex reserves are held in dollars, 40% in euros, 9% in sterling, 3% in Canadian dollars, and for the first time, Australian dollars at 2%. Previously, Russia had held 1.6% of its currency reserves in yen, and some think that his detailed description of current holdings (which added up to 100%) without mentioning the yen is meant as a further warning to Japan.
(information for this story from Reuters)