Russian Central Bank Boosts Gold Reserves Back To 2023 Highs In August
(September 20, 2023 - Ernest Hoffman)
(Kitco News) - The latest data from the International Monetary Fund’s (IMF) International Financial Statistics (IFS) report showed that Russia’s central bank increased their gold reserves in August, and they have now returned to the level they were at the beginning of 2023.
“IMF IFS data shows #gold reserves at the Central Bank of Russia rose by 3 tonnes in August,” wrote Krishan Gopaul, senior analyst at the World Gold Council in a tweet. “This means that its gold reserves are back to where they were at the start of the year - 2,333 tonnes.”
While Russia is intent on increasing its gold reserves to help mitigate Western economic sanctions related to its February 2022 invasion of Ukraine and to support a potential gold-backed BRICS currency, the country has been forced to use its gold reserves to settle international transactions and to cover budget deficits.
In May, Russia's central bank sold four tonnes of gold and 2.59 billion yuan (USD$365 million) from the National Wealth Fund (NWF) accounts to raise additional money to finance their budget deficit.
“In May 2023 … a portion of NWF money at accounts with the Bank of Russia totaling 2.59 bln yuan and 3.86 metric tons of gold in the depersonalized form were sold at 48.967 bln rubles,” the finance ministry said. “The money earned was credited at the integrated federal budget account to finance its deficit.”
Russia reported a 3.4 trillion-ruble (USD$42 billion) deficit in the first four months of the year, driven largely by lower energy revenues.
And in March, World Gold Council reported that the Russian central bank sold 3.1 tonnes of gold as the precious metal kicked off a major rally. At the same time, it also published missing data on its monthly gold holdings dating back to February 2022, which coincided with the start of the Ukraine war. The new data showed that Russia's gold reserves increased by 28 tonnes during that period.
Analysts reacted positively to the more detailed data, but some raised questions regarding Russia's gold production and where the precious metal is going.
"I'm glad to see that the history of Russia's #gold holdings has now been backfilled," said WGC's chief market strategist John Reade. "It does beg the question of where the rest of Russia's production has gone - at about 300t per annum this is far more than domestic demand or CBR's reported purchases."
Daniel McCarthy, Strategist at DailyFX.com, believes that China and Russia may be setting aside some of their massive gold production to support a new currency to rival the U.S. dollar.
“On a recent trip to Western Australia, one the largest physical gold-producing regions globally, a number of contacts highlighted that almost every ounce of the yellow metal currently being dug out of the ground was being put on a ship to China,” he said. “Such anecdotes of other BRIC members taking similar actions have been reported elsewhere.”
“Keeping in mind that Australia, China and Russia are also the top producers of gold, it might be the case that gold hoarding has been a feature of the price action of late.”
Russia will be assuming the BRICS chairmanship on Jan. 1, and the bloc finance ministers’ new mandate would seem to set Russian President Vladimir Putin up for a major currency announcement when his country hosts the next BRICS summit in October of 2024.
