Bank of Russia Resumes Gold Buying After Two-Year Pause

The comments below are an edited and abridged synopsis of an article by Eddie Spence

Russia’s central bank said it will start purchasing gold again, just under two years after it ended a long-running buying spree that helped prop up bullion prices last decade.

Bank of Russia Resumes Gold Buying After Two-Year Pause - BullionBuzz - Nick's Top Six
A hundred Russian ruble bank note with three small golden ingots in macro close up

The central bank will begin buying gold again on the domestic precious metals market, it said. The move comes after the monetary authority and several of the country’s commercial banks were sanctioned following Russia’s invasion of Ukraine.

The Bank of Russia spent six years accumulating gold, doubling its holdings and becoming the biggest sovereign buyer. It stopped in March 2020 as prices spiked at the onset of the pandemic, and has kept its stockpile steady since. Russian purchases provided a key pillar of support for the market when demand from investors was muted.

Gold swung wildly recently, surging as investors turned to safe-haven assets after Russia invaded Ukraine and then tumbling back as Western nations imposed sanctions.

Russia will continue to usurp its own gold production to bolster its war chest, and that’s likely to be viewed as initially bullish by the market. But the purpose of buying gold in the domestic market is to monetize it when required.

Central bank buying has been a key source of demand for bullion in the past year, alongside a revival in appetite from Asian jewelry consumers. Central banks added 463 tons to reserves in 2021, an increase of more than 80% from a year earlier, according to the World Gold Council.

Russia had more than 2,000 tons of gold at the end of January, according to data from the IMF, accounting for just over 20% of its reserves. It’s the fifth-largest sovereign gold owner globally.

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