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Gold is widely considered a safe haven investment, and if Russia’s recent buying habits are anything to go by, the country sees trouble ahead for the global economy.
In March, Russia’s central bank returned to purchasing physical bullion after a two-month break at the start of the year. The organisation announced it added a further 39.8 million ounces – approximately 30 tonnes – to national reserves last month.
Global central banks have recently been net buyers of the precious metal, with World Gold Council (WGC) figures showing the institutions bought 477.2 tonnes of the commodity in 2014. This figure is close to a 50-year high.
However, Russia’s consumption has managed to impress even within this highly active market. The WGC reported that the country stockpiled a further 173 tonnes of gold bars last year, bringing its total holdings to approximately 1,200 tonnes.
In fact, the nation purchased 36 per cent of all gold bought by world banks during this time, and the commodity now accounts for 12 per cent of Russia’s entire reserves. Furthermore, the country is listed fifth on WGC and International Monetary Fund rankings for the largest reported gold holdings.
Tackling sanctions
Analysts claim that one of the primary reasons behind Russia’s continued appetite for gold is the sanctions placed on the country after the conflict with Ukraine.
Reuters reported in November that the central bank was forced to step in after domestic mines were unable to sell the gold they produced to foreign buyers.
“Central banks do not accumulate gold for no reason; you hold gold as part of your reserves to guard against these worse-case scenarios,” Natixis analyst Nic Brown told the news provider.
Russia may also be trying to move away from fiat currencies, particularly the US dollar. This trend has been noticed in a number of eastern countries, including China, which is now considered the world’s biggest consumer of gold.
“It would make sense that in a situation in which the Russians found their dollar reserves were no longer useful, for whatever reason, they would want to use alternatives, and the country has accumulated a large amount of gold in recent years,” he stated.
Whatever the reasons for Russia’s affinity to gold, this behaviour is likely to encourage investors who store precious metals as part of their portfolio. Not only does it indicate a lack of faith in the fiat system, there could also be more socioeconomic problems on the horizon.
Storage Vaults News
From Guardian Vaults
Why is Russia’s central bank buying so much gold?
Gold is widely considered a safe haven investment, and if Russia’s recent buying habits are anything to go by, the country sees trouble ahead for the global economy.
In March, Russia’s central bank returned to purchasing physical bullion after a two-month break at the start of the year. The organisation announced it added a further 39.8 million ounces – approximately 30 tonnes – to national reserves last month.
Global central banks have recently been net buyers of the precious metal, with World Gold Council (WGC) figures showing the institutions bought 477.2 tonnes of the commodity in 2014. This figure is close to a 50-year high.
However, Russia’s consumption has managed to impress even within this highly active market. The WGC reported that the country stockpiled a further 173 tonnes of gold bars last year, bringing its total holdings to approximately 1,200 tonnes.
In fact, the nation purchased 36 per cent of all gold bought by world banks during this time, and the commodity now accounts for 12 per cent of Russia’s entire reserves. Furthermore, the country is listed fifth on WGC and International Monetary Fund rankings for the largest reported gold holdings.
Tackling sanctions
Analysts claim that one of the primary reasons behind Russia’s continued appetite for gold is the sanctions placed on the country after the conflict with Ukraine.
Reuters reported in November that the central bank was forced to step in after domestic mines were unable to sell the gold they produced to foreign buyers.
“Central banks do not accumulate gold for no reason; you hold gold as part of your reserves to guard against these worse-case scenarios,” Natixis analyst Nic Brown told the news provider.
Russia may also be trying to move away from fiat currencies, particularly the US dollar. This trend has been noticed in a number of eastern countries, including China, which is now considered the world’s biggest consumer of gold.
“It would make sense that in a situation in which the Russians found their dollar reserves were no longer useful, for whatever reason, they would want to use alternatives, and the country has accumulated a large amount of gold in recent years,” he stated.
Whatever the reasons for Russia’s affinity to gold, this behaviour is likely to encourage investors who store precious metals as part of their portfolio. Not only does it indicate a lack of faith in the fiat system, there could also be more socioeconomic problems on the horizon.
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