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Wednesday, May 21, 2014

Disgorging US Dollar Reserves: Russia bought 28 tonnes of gold in April

Frank Knopers 21 mei 2014 

Russia bought 28 tonnes of gold in April, according to the latest data released by the Bank of Russia. With the purchase, valued at a market price of $1,17 billion, Russia expands it’s gold holdings to a total of 1.070 tonnes. This purchase was the largest since may 2010, when the Bank of Russia added 34,22 tonnes to their gold holdings. The country has been buying substantially since 2006, when it had only about 250 tonnes in their vaults. With the present gold hoard at 1.070 tonnes, Russia ranks sixth among the largest gold holdings in the world.

Since 2006, Russia values it’s gold reserves at the current market price, instead of a fixed historical price. This valuation method is derived from the Eurosystem, which values the European gold reserves at market prices each quarter since the inception of the euro currency. The central bank of Russia valued their gold at $44,3 billion on the 1st of May, which is about 9,4% of their total reserves of $471,1 billion. One year ago, Russia held a larger percentage of their reserves in precious metals, but because of the falling gold price, the percentage dropped as well. By adding yellow metal to the reserves, Russia is approaching the 10% target once again.

Shift from dollars to gold

According to central bank governor Sergey Shvetsov, Russia will keep adding gold to their reserves as a way to diversify from currency reserves. “Last year we bought approximately 100 tonnes of gold. 

This year it will be less, but it is still a substantial amount.” At the same time Russia is selling dollar reserves. According to the latest TIC-data of the Federal Reserve, Russia has sold almost $26 billion of dollar reserves in March alone. Compared to one year ago Russia sold $50 billion of their total dollar holdings. This is a reduction of about 33% in one year.

Russia bought 28 tonnes of gold in April (Source: