by Lawrence Williams
The latest announcement from the Russian Central Bank shows, that after several months of continuing high levels of additions to its gold reserves last year, it made no new gold purchases in January, although it did offload a substantial volume of U.S. Treasuries from its foreign reserves in December. There had been speculation late last year that Russia would, in fact, sell some of the gold it had been accumulating (171 tonnes last year) to help protect its currency in light of U.S. and EU sanctions and the sharp drop in energy prices which had adversely impacted the nation’s exports. However, this proved not to be the case and it looks as though any transactions to help mitigate the decline in the ruble was accomplished through the sale of U.S. Treasuries. Altogether, over the whole of 2014, Russia appears to have disposed of more than $50 billion in its holdings of U.S. Treasuries to support the ruble and to buy gold. Some $22 billion of these sales was undertaken in December when the Central Bank bought 18.7 tonnes of gold worth around $7.5 billion.
Some of the same analysts are now suggesting that the adverse economic factors have thus caused Russia to cut back on its gold buying programme – but in our view it is far too early to tell. Last year, for example, Russia also bought no gold in January, nor in March, but a small amount in February (see extraction from a bigger www.goldchartsrus.com graphic shown below).
As can be seen, although Russia has been a fairly consistent gold buyer for a substantial period of time, the purchases can be erratic on a month-by-month basis so perhaps not too much should be read in the Central Bank’s absence from the market for a solitary month – at least not yet.
With the decline in its U.S. Treasuries without an increase in its gold holdings, gold probably now accounts for around 13-14% of Russia’s total foreign reserves, still far below the percentages reported to be held by the U.S. (72.6%) or of Germany, Italy and France all of which hold around two-thirds of their foreign exchange reserves in gold. One suspects that President Putin, who has been decidedly pro-gold in his statements, may well continue to follow this policy of increasing the country’s gold reserves and selling U.S. Treasuries.
Russia is also now, according to the Metals Focus specialist consultancy, the world’s second largest producer of gold, after China, with annual mine production estimated at some 272 tonnes in 2014 – seizing the No.2 slot from Australia.
Lawrence Williams is a former CEO of top mining industry business publisher, Mining Journal Limited, up until its takeover by Mining Communications Ltd. (MCL) in 2003 and was CEO/General Manager/Editorial Director of Mineweb from 2006 up until taking partial retirement, but continues to write for the site.