Why is Russia rushing to buy gold reserves?
Russia is aggressively selling US government debt and buying gold. Lots of gold.
According to CNN, official figures show that the Russian Central Bank is buying gold heavily, adding nearly 29 tons in July, the largest monthly increase since November 2017. Previously, the Russian Central Bank added 20 tons of gold in May and 17 tons in June.
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| Mr. Putin holds a gold bar while visiting the Central Bank of Russia's gold vault in Moscow in January 2011. (Photo: Reuters) |
Russia's total reserves of the precious metal have increased by 37% since the beginning of 2016, and are now worth an estimated $76 billion.
Russia’s increased gold purchases coincided with a sharp reduction in its holdings of US Treasury bonds, which fell by 84% between March and May to $14.9 billion. These bonds now account for just 17% of the Russian Central Bank’s reserves.
Eugene Chausovsky, a senior Eurasia analyst at the geopolitical intelligence firm Stratfor, said Russia’s aggressive gold purchases were aimed at reducing its dependence on the US dollar amid strained relations between the US and Russia. In addition, Moscow may be worried that sanctions could prevent it from selling US Treasury bonds in the future or prohibit Russian banks from using the US dollar to conduct transactions.
According to Mr. Chausovsky, Russia benefits by detaching its economy from the US dollar in the face of Washington's tougher sanctions.
Earlier in August, Finance Minister Anton Siluanov said Russia would continue to sell US debt in response to sanctions. "We have significantly reduced our investments in US assets," Siluanov said. "In fact, the dollar, which is considered an international currency, is becoming a risky payment instrument."
The World Gold Council confirmed that Russia has risen rapidly in the list of countries with the largest gold reserves, surpassing China earlier this year. The United States is still the largest gold holder with a total of 9,000 tons.
