by Lawrie Williams, Sharps Pixley:
China may continue to be telling the world that it has added zero to its gold reserves since October 2016, but Russia is still increasing its gold hoard on a monthly basis. Its official total gold reserve holding as reported to the IMF surpassed that of China a couple of months ago and continues to rise further with the central bank reporting another 300,000 ounces (9.33 tonne) increase in March bringing its official gold holding to around 1,890 tonnes, now getting on for nearly 50 tonnes more than China’s ‘official’ total of 1,842.6 tonnes.
There is speculation that, given the badwill between the two nations, Russia may dispose of some of the U.S.-denominated assets in its substantial Forex holdings replacing them with some other currency (the Chinese yuan for example) and gold (It may already have started this process). This would be a move that if followed by some other nations (notably China with its enormous forex reserves) could start to destabilise the U.S. economy which is very reliant on the global acceptance of the U.S. dollar as the world’s principal reserve currency..
According to a recent report by Russian news agency, Pravda (www.pravda.ru), The Bank of Russia holds a third of its currency assets in the U.S. but all its physical gold holdings are thought to be held in depositories in Moscow, St Petersburg and Yekaterinburg. Formally, the USA can not impose sanctions on the Bank of Russia, even though earlier, US authorities froze the assets of the National Fund of Kazakhstan. The move clearly indicated that Russian assets in the USA could be frozen as well. If the USA freezes Russian gold and foreign currency assets, such an act would be equal to the declaration of war, economist and publicist Mikhail Khazin earlier told Pravda.Ru.
Gold offers Russia independence from the dollar amid financial sanctions from the U.S. and its allies, notes Bloomberg in a recent article. The initial sanctions were imposed in 2014 as punishment for Russia’s involvement in Ukraine and annexation of Crimea and have just been tightened following alleged Russian state involvement in the Skripal poisoning in the U.K. and an alleged chemical weapons attack by the Syrian Regime in Douma. (The Syrian Government is supported militarily by the Russians). Russia denies any involvement and, indeed claims the alleged Douma chemical attack is fiction!
Much of Russia’s gold purchases come from local production — Russia is the world’s third-largest miner of the metal behind China and Australia, according to research firm Metals Focus although Russia’s Finance Ministry’s own figures suggest it may actually be in second place having overtaken Australia last year with output of more than 300 tonnes. On the Metals Focus reckoning Russia produced around 270 tonnes of gold while its central bank added over 200 tonnes to its reserves. (See: World Top 20 Gold producing nations in 2017 – not peak gold yet!).
Russia’s gold reserves had been run down under Mikhail Gorbachev to as little as 290 tonnes, but President Vladimir Putin is a strong believer in the power of gold and forex reserves as a guarantor of Russian financial independence and is believed to have been the leading instigator of the reserve increase since he first came to power back in 2000.