Russia’s central bank once again increased its gold holdings substantially in April. They added another 300,000 ounces to their existing stockpile bringing the total up to 40.1 million ounces (see chart below).
It marks the continuation of a policy which was only slightly affected by last year’s rouble crisis following the collapse in the price of oil and Western imposed sanctions.
In an address to Russia’s lower house, a senior policy maker at Russia’s central bank indicated that while gold prices fluctuate they offer invaluable insurance against external factors. Dmitry Tulin, manager of monetary policy said,
“The price of it swings, but on the other hand it is a 100-percent guarantee from legal and political risks.”
Reuters reports that western sanctions “have not targeted government assets abroad” to date and suggest that Russia’s reduction of its exposure to U.S. Treasury bills is a symptom of its fear that state assets will be targeted next.
Of course, Russia’s reducing of its Treasury bill holdings may also be part of the policy of de-dollarisation which Russia and China are energetically pursuing. As may the insatiable appetite of their central banks for gold.
Countries across central Asia continue to buy gold eagerly. The government of Kazakhstan banned the export of mined gold and is stockpiling its reserves – although its current holding of 200 tons is dwarfed by those of its Russian and Chinese neighbours.
Gold is absolutely central to monetary policy in Eurasia and Asia. China openly refer to their yuan as “the reserve currency of the world”. While this ambitious slogan may be slightly premature it is likely that by backing the yuan with gold it would become a major reserve currency that would challenge the debt-bloated dollar.
Investors would be wise to take heed of Russia’s attitude to gold as a “100% guarantee”. In the crisis that approaches physical gold held outside the banking system in safe vaults in safe jurisdictions will prove to be such a guarantee to individuals, companies, pension funds, family offices, as well as nations.