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More Gold for Russia

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This has become a monthly feature here a SchiffGold News – Russia buys more gold.

The Central Bank of Russia added another 18.7 tons of gold to its stash in March according to a press release last week. This boosts the country’s gold reserves to 2, 167.9 tons or 69,700,000 ounces. Gold now makes up about 18% of the Russian central bank’s reserves.

Through the first quarter of this year, Russia has increased its gold hoard by 56 tons. This continued a trend we saw throughout 2018. As a Bloomberg article earlier this month put it, “Vladimir Putin’s quest to break Russia’s reliance on the US dollar has set off a literal gold rush.”

Russia has been endeavoring to reduce its exposure to the dollar over the last several years by buying gold and selling off US Treasurys. Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. In February 2018, Russia passed China to become the world’s fifth-largest gold-holding country. Over the last decade, Russia has quadrupled its bullion reserves, according to Bloomberg.

Russia has also been divesting itself of US debt. In the spring of 2018, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts,  the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.

The pace of Russian gold accumulation has begun to outstrip the country’s domestic production. Russia ranks third in the world in gold production, and the central bank is the biggest buyer. Renaissance Capital chief economist Oleg Kouzmin told Bloomberg that given the geopolitical risks, the central bank will likely keep increasing gold’s share of reserves.

Should it reach the limit for domestic purchases, I think the central bank will start to import gold.”

Russia is not the only country on a gold-buying spree.

China bought gold for the fourth straight month in March, adding another 11.2 tons of the yellow metal to its reserves, and other central banks have also been adding to their gold holdings. In total, the world’s central banks accumulated 651.5 tons of gold last year. The World Gold Council noted that 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. Russia was the leading purchaser of the yellow metal in 2018. Central banks in Turkey and Kazakhstan were also big buyers. We even saw increases in gold reserves from two EU banks – Hungary and Poland.

There is a growing concern in many countries about over-dependence on the greenback. In a CNN interview last fall, French President Emmanuel Macron said European corporations and entities are too dependent on the dollar, calling it “an issue of sovereignty.” The EU even took steps to minimize the ability of the US to use the dollar as a foreign policy weapon. In September 2018, the EU announced plans to develop a special payment channel to circumvent US economic sanctions and facilitate trade with Iran.

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