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Russia Is Buying Gold, Stability and Economic Independence

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Russia’s gold holdings have topped 1,800 tons.

To put that into perspective, between 2000 and 2007, the Russian central bank held just 400 tons of gold. At that point, the country launched an aggressive gold acquisition program. In October of this year alone, the Bank of Russia bought 21.8 tons of gold. At 1,801 tons, the yellow metal now accounts for 17.3% of the country’s reserves. In the second quarter of 2017, Russia accounted for 38% of all gold purchased by central banks. Russia ranks sixth in the world in gold holdings behind the United States, Germany, Italy, France, and China.

Russia’s growing gold hoard is helping to establish economic and political stability and independence for the country.

Since Vladamir Putin took office, the country’s gold reserves have increased 500%, according to RT. During a conference on precious metals in Moscow, First Deputy Chairman of the Russian Central Bank Sergey Shvetsov confirmed Putin was driving the bank’s acquisition of gold.

Under the instruction by President Putin, the Bank of Russia has been implementing the program of increasing the absolute share of gold in the gold and currency reserves of Russia for many years.”

As RT pointed out, buying gold makes a country less vulnerable to geopolitics. After the Crimea referendum in early 2014 and the ensuing political fallout, Russia increased its gold reserves by almost 75%. Shvetsov said buying gold increases Russia’s independence.

I will not dwell on the geopolitical situation. Every smart person understands the value of gold in ensuring financial and economic security of the country.”

Macquarie Group metals analyst Matthew Turner told Bloomberg gold is as geopolitics-proof an investment as any in the age of sanctions.

Gold is an asset that is independent of any government and, in effect, given what is usually held in reserves, any western government. This might appeal given Russia has faced financial sanctions.”

In other words, gold means independence.

Interestingly, leveraging the power of gold is not a new idea in Russia. According to an article on RussiaFeed.com, Joesph Stalin had a plan to create a gold-backed ruble as an alternative to the US dollar.

By the time of the German attack on the USSR in 1941 Stalin had amassed a gold reserve in the Soviet Central Bank of 2,600 tons (still a record), and following the end of the war he brought the USSR’s gold reserve back up to 2,050 tons, where it stood at the time of his death. Stalin’s plan was to launch a fully convertible gold backed Soviet rouble by 1957, principally to fund trade with the USSR’s socialist allies including China.”

There is also a move afoot to create a gold trading system between Brazil, Russia, India, China, and South Africa (BRICS). Shvetsov talked about it during the conference.

The traditional (trade) system based in London and partially in Swiss cities is becoming less relevant as new trade hubs are emerging, first of all in India, China, and South Africa.  We are discussing the possibility of establishing a single (system of) gold trade both within BRICS and at the level of bilateral contacts.We assume that trade and clearing links should be established. The point is that gold buyers should decide on the place of purchase.”

This could have a huge impact on the gold market, significantly shifting power from West to East. China, Russia, South Africa, and Brazil are among the world’s biggest gold producers and China is one of the top importers of the yellow metal.

China’s central bank has also been aggressively buying gold. It is pretty clear that Russia and the Chinese are working toward de-dollarization. As economist Ronald-Peter Stöferle put it:

The world is looking for alternatives to the dollar — and finds them more and more often.”

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