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.

 

Disclaimers: Guardian Vaults Holdings Pty Ltd, Registered Office, Scottish House, 100 William Street, Melbourne, Victoria, 3000. ACN 138618176 (“Guardian Vaults”) All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from the publisher and/or the author. Information contained herein is believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal situation. Guardian Vaults, its officers, agents, representatives and employees do not hold an Australian Financial Services License (AFSL), are not an authorised representative of an AFSL and otherwise are not qualified to provide you with advice of any kind in relation to financial products. If you require advice about a financial product, you should contact a properly licensed or authorised financial advisor. The information is indicative and general in nature only and is prepared for information purposes only and does not purport to contain all matters relevant to any particular investment. Subject to any terms implied by law and which cannot be excluded, Guardian Vaults, shall not be liable for any errors, omissions, defects or misrepresentations (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (direct or indirect) suffered by persons who use or rely on such information. The opinions expressed herein are those of the publisher and/or the author and may not be representative of the opinions of Guardian Vaults, its officers, agents, representatives and employees. Such information does not take into account the particular circumstances, investment objectives and needs for investment of any person, or purport to be comprehensive or constitute investment or financial product advice and should not be relied upon as such. Past performance is not indicative of future results. Due to various factors, including changing market conditions and/or laws the content may no longer be reflective of current opinions or positions. You should seek professional advice before you decide to invest or consider any action based on the information provided. If you do not agree with any of the above disclaimers, you should immediately cease viewing or making use of any of the information provided.

Enquire now

Please provide your details and we will contact you to discuss your needs.

[contact-form-7 id="1402" title="Form1 - Enquire Now"]

Enquire Now

Please provide your details to reserve space at Guardian Vaults.

[contact-form-7 id="1402" title="Form1 - Enquire Now"]

Enquire Now

Please provide your details to reserve space at Guardian Vaults.

[contact-form-7 id="1853" title="2018 - Sydney Deposit Box"]

Enquire Now

Please provide your details to reserve space at Guardian Vaults.

[contact-form-7 id="1854" title="2018 - Melbourne Deposit Box"]

Enquire Now

Please provide your details to reserve space at Guardian Vaults.

[contact-form-7 id="1856" title="2018 - Sydney Safe Box"]

Enquire Now

Please provide your details to reserve space at Guardian Vaults.

[contact-form-7 id="1855" title="2018 - Melbourne Safe Box"]