Russia upping the ante in its gold reserve increases

(December 21, 2017 - by Lawrie Williams)

Sanctions. What sanctions? Despite the imposition by the U.S. and some of its allies of economic sanctions against Russia over its annexation of Crimea, the Russian economy appears to be in a far better state than that of the USA. Unlike the latter Russia’s current account statistics remain stable to positive despite sanctions. The country’s economic management seems to be comfortably better than most Western economies.

And in gold reserves Russia added another 29 tonnes in November, making 2017 already the country’s highest ever year for gold reserve increases with another month still to go. In recent years Russia has been adding around 200 tonnes annually to its gold reserves, but this year has already exceeded this amount as it continues to diversify its forex holdings away from U.S. dollar dependence.

In terms of global national holdings of gold, Russia remains in sixth place behind China, but is rapidly overhauling China’s official published reserve figure of 1,842.6 tonnes – not that we believe the Chinese reported figure. Russia’s gold reserves are currently at around 1,830 tonnes so another month of similar sized gold reserve increases will see Russia leapfrogging China in the IMF world gold reserve tabulation assuming China continues to report zero increases.

Indeed with military successes in Syria and its domestic balance of payments performance, Russia seems to be running rings around the USA economically, diplomatically and militarily. It seems to be building a strong economic alliance with the world’s other superpower, China, which is now taking a significant tranche of Russia’s important oil and gas output with the construction of pipelines between the two nations. Doubtless much of the anti-Russian rhetoric in the U.S. and amongst some of its allies, as well as President Trump’s recent statement that Russia and China are the primary threat to U.S. global economic dominance and are thus competitive powers, is an attempt to change global perceptions in favour of the USA.

Russia, like China (which is why we don’t believe the latter’s gold reserve statements) tend to believe that gold will play an important role in any global economic realignment over the next few years. The U.S. is thus somewhat on the back foot in its reluctance to give any official credence to the place gold has in the world order. At the moment the U.S. remains dominant in keeping the gold price under control – but for how long given the substantial gold flows from West to East?