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Russia Passes China; Gold Hoard Now World’s Fifth Largest

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Russia has passed China to become the world’s fifth-largest gold-holding country.

According to a Bloomberg report, the Bank of Russia added nearly 20 tons of gold to its stash in January, raising its total to 1,857 tons. The People’ Bank of China reported holdings of 1,843 tons.

Russia has bought gold every month since March 2015 in an effort to diversify its foreign currency holdings and minimize its dependence on the US dollar.

According to the World Gold Council, Russian gold reserves increased 224 tons in 2017, marking the third consecutive year of plus-200 ton growth.

Only three of the world’s top-10 gold holding countries have materially increased their hoard in recent years. Along with China and Russia, Turkey has also been on a gold-buying spree.

Gold bullion now accounts for 17% of Russia’s total foreign reserve assets. That compares with China’s gold stores, accounting for about 2.5% of its reserves. But it should be noted that many analysts think China may have far more gold than it actually reports.

Russia ranks the third-largest producer of the precious metal. The government purchases about two-thirds of the country’s mining output through local banks.

Russia’s growing gold hoard is helping the country establish economic and political stability and independence. As Bloomberg put it, “Gold offers Russia independence from the dollar amid financial sanctions from the US and its allies.” An RT article reporting the growth in Russian gold holdings was headlined, “Russia overtakes China in gold reserves race to end US dollar dominance.”

Tsarizm, a blog focused on Russia, the former Soviet Union and Eastern Europe, provided some analysis of Russia’s drive to own gold.

Russian President Vladimir Putin has been keen to reduce Russia’s exposure to the Western, dollarized, financial system. The Bank of Russia has set up swap lines direct with other economically powerful nations to trade direct in their own sovereign currencies, removing the dollar from the trade equation altogether. However, the hoarding of gold may be for a different reason entirely; Putin may sense a financial crisis in the cards for the West, as sovereign debt levels once again spike, a crisis he wants to take advantage of, to remove Russia from the financial tentacles of the West.”

As Macquarie Group metals analyst Matthew Turner told Bloomberg last fall, 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.”

After the Crimea referendum in early 2014 and the ensuing political fallout, Russia increased its gold reserves by almost 75%.

As we reported last year, Russia and China seem to be setting the stage to set up an alternative the international US dollar system. The two countries are reportedly moving closer to developing a broader gold-based trading system that could also include Brazil, India and South Africa (BRICS). Ultimately, Russia and China would like to dethrone the dollar.

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