The World’s Largest Gold Buyer Is Now Russia

The comments below are an edited and abridged synopsis of an article by Alex Kimani

Russia’s central bank is adding to its stockpile of gold. Russia bought another 597,000 ounces (18.67 tonnes) of gold in June, bringing its total reserves to 2,208 tonnes (approximately $100.3 billion).

The World’s Largest Gold Buyer Is Now Russia | BullionBuzz
Golden soviet CCCP emblem with hammer and sickle on a marble plate

Russia’s year-to-date purchases are more than 96 tonnes. Gold now makes up 19% of the country’s foreign reserves compared to just 2% a decade ago. It is now officially the world’s largest gold buyer.

The World Gold Council has reported an overarching trend towards gold, saying the world’s central banks purchased 651.5 tonnes of the metal last year, the largest amount in 48 years. Global gold reserves increased 8% in June, marking the highest monthly gain in three years.

Adrian Ash, director of research at BullionVault ,says Putin’s heavy gold buying is bad for world peace: “Heavy gold-buying by governments or central banks is rarely a good sign for world peace and co-operation.”

Ash has a point. Several nations, including Russia, have gone on a de-dollarization drive as they dump their dollar holdings and buy gold instead. Russia has also ramped up gold production and is now the world’s 3rd-largest producer.

The country plans to increase output by 50% over the next seven years and by 100% by 2030. Moscow bought nearly 100% of the country’s gold output last year.

Russia still lags the developed nations in terms of gold reserves. The US is the largest gold holder, followed by Germany, the Netherlands and Italy, and France. Moscow needs to increase its stockpiles at least 3x to be in the same league.

Central banks’ gold buying is bullish for gold. Central banks buy 15-20% of total mine output in a typical year, and this might increase significantly in the coming years if the current trend continues.

There’s another reason why a higher gold price will be supported in the near and mid-term: dovish central banks. Interest rates globally are at historic lows and are likely to remain that way due to a tepid economic outlook. Low interest rates lower the opportunity cost of holding non-yielding bullion and weighs on the dollar, thus making it cheaper to buy commodities like gold.

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