GOLD TO LONDON! (c) the Central Bank of the Russian Federation. Russian gold flowed to the West, which was not even during the War

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

According to the Bank of Russia and the Federal Customs Service (FCS), the country's trade surplus is rapidly declining. If in the first quarter of 2020 it amounted to plus 32 billion dollars, then in the second it more than doubled, to 14 billion dollars.

The "fat years" are over. The Russian authorities and business are frantically looking for a way out. Some people see a solution to the problem: foreign exchange earnings from gold exports in the second quarter of 2020 exceeded earnings from natural gas exports. But will exporting gold help the Russian economy? Let's figure it out …

In the first quarter of this year, gas exports brought in revenues of $ 7.0 billion, and in the 2nd quarter it fell by half - to $ 3.5 billion. Gazprom had such low quarterly figures only in difficult 90s, and even then not always. But the bad news was offset by good news: in April and May alone, Russian companies exported 66.4 tons of gold worth $ 3.58 billion. In two months, Russia received more currency from the export of the "yellow metal" than from the export of natural gas in three months 2 th quarter.

Experts say that such a unique situation (excess of gold exports in relation to natural gas) happened only once - in 1994. This year, the viral and economic crisis that swept the whole world contributed to a sharp increase in demand for the "yellow metal". Accordingly, the price of gold began to rise as well. In July 2020, the average price has already broken through the level of $ 1,800 per troy ounce and continues to grow. Even the most cautious analysts do not exclude that by the end of the year the price may break through the level of $ 2,000.

Now let's go back to the data on gold exports in 2020. What caused such a sharp rise in exports in April-May this year? First of all, the fact that the Bank of Russia stopped gold purchases from April 1, 2020, announcing this publicly on its website. Gold miners had to urgently reorient themselves to the free market, and almost exclusively to the external one.

Many well-fed experts welcome this maneuver. They say that the export of the "yellow metal" will compensate for the loss of foreign exchange earnings from the export of hydrocarbons (not only natural gas, but also crude oil and oil products). But the fact is that full compensation will not work.

Let's imagine that the annual production of precious metal in Russia is 300 tons and all of it is sent to the external market. At a price of $ 1,800 per troy ounce, it turns out that foreign exchange earnings will be around $ 17.5 billion. Even if all 100% of the mined gold is exported, then with its help it will be possible to compensate for no more than a third of the losses from the fall in foreign exchange earnings from the sale of natural gas.

Using gold to plug currency "holes" in the Russian economy is sheer barbarism. Gold should not be exported, but accumulated. Especially considering the continuously rising prices for the precious metal. First of all, it is necessary to build up gold reserves as part of the international reserves of the Russian Federation. And also the precious metal should be accumulated by Russian banks, investment funds, individuals.

It cannot be ruled out that another year or two will pass, and all the vaunted reserve currencies will collapse. As a result, a new world monetary and financial order will emerge, in which gold may be in the role of the main monetary unit. The Central Bank proudly reports that the share of gold in the international reserves of the Russian Federation continues to grow. As of April 1, 2020 (the date from which the Central Bank stopped purchasing gold), this share was equal to 21.26%. Three months later, on July 1, it had already grown to 22.99%! And this despite the fact that the Central Bank did not carry out purchases in the second quarter.

The share grew only due to the fact that the "yellow metal" was growing in price. And a number of currencies that make up international reserves were depreciating. It would seem that if the wind blows into the "sails" of gold, then the Central Bank should continue to purchase metal. Moreover, by doing so, he would have supported the extraction of the precious metal in the country, which is rightly called the "currency shop".

However, Russia's "currency shop" is being pushed to serve the London gold market. After all, this is where most of the products of domestic gold miners have been sent since the beginning of this year. The Central Bank justifies the termination of gold purchases by the fact that, in the composition of international reserves, its "optimal" share has been reached.

Interestingly, on the basis of what premises does the Central Bank "optimize" this share? Of course, the current 23% (share of gold) looks very impressive against the background of some 2-3% in not so distant years.