Russia’s New Gold Rush Could Shake Up the International Monetary System

(April 8, 2019 - Bruno Maçães)

Russia and China might be considering a gold-backed digital currency

Russia is buying gold. A lot of gold. Within the span of a decade, the country quadrupled its reserves. Gold buying last year exceeded mine supply for the first time, so Russia is about to become a net importer of the metal.

Commentators have suggested possible reasons for the buying spree. Are the Russian authorities preparing for a renewed clash with the United States and are they attempting to reduce their vulnerability to financial sanctions? Or do they fear a homegrown financial crisis?

Others suspect something bigger may be at play.

The sheer size of the purchases might reveal bolder motives, with Moscow preparing its first salvo in the coming battle for a monetary reset.

What makes the recent moves especially significant is the fact they are being replicated in Beijing. According to official data, China raised its bullion reserves to 60.62 million ounces in March from 60.26 million a month earlier; last month’s inflow was 11.2 tons, following the addition of 9.95 tons in February, 11.8 tons in January and 9.95 tons in December.

China may actually end the year as the top buyer after Russia. Right now it looks like a close race.

The purchases are unlikely to have been coordinated by Russia and China, but some mutual influence is evident: the two countries expect to benefit from the other’s purchases, which should be supportive of long-term prices.