1900 tons: the whole truth about the gold reserves of Russia

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

Recently Turkey, against the backdrop of difficult relations with the West, removed its gold reserves from American storage facilities. The Bank of Russia holds gold only at home. At the same time, for several years in a row, the regulator has been increasing its purchases, and now it has about 1900 tons in reserves. Analysts generally consider such a strategy to be justified, but offer alternative options on how to preserve government savings.

Turkey, following Germany, repatriated its gold reserves to their homeland - all 29 tons. This is a small volume; Russia, for example, now has about 1900 tons.

“Russia has the fifth largest reserves of physical gold in the world after 8130 tons in the United States, 3380 tons in Germany, 2450 tons in Italy, 2435 tons in France, 1808 tons as of the beginning of the year was in China. For comparison, in 1992 Russia only had no more than 300 tons of gold, including private storage. And the Central Bank regularly replenishes its gold reserves, mainly by physically purchasing ingots from producers within the country,”explains Pyotr Pushkarev, chief analyst at TeleTrade Group.

According to the Central Bank, as of April 1, 2018, the volume of monetary gold in international reserves amounted to 60.8 million net troy ounces, which is equivalent to $ 80.482 billion. This is 17.6% of the total reserves ($ 458 billion). The main part of government savings is kept in securities ($ 277, 344 billion), cash and deposits ($ 93, 474 muz).

The regulator defines monetary gold as “standard gold bars and coins made from gold with a fineness of at least 995/1000 belonging to the Bank of Russia and the government of the Russian Federation”.

This category includes both gold in storage and "in transit and in safe custody, including abroad."

The Bank of Russia, which manages the country's international reserves, could not provide a prompt comment, but earlier it was reported that the Central Bank "stores monetary gold in Russia."

Two-thirds of Russia's gold reserves are located in the main central bank vault in Moscow with a powerful and multi-level innovative security system, its total area is 17 thousand square meters. m of which 1, 5 thousand sq. m allotted specifically for the placement of the gold reserve. More than 600 divisions of the Central Bank are engaged in the storage of the rest.

Rumors appeared in the press that some of the gold reserves are still stored in the United States or Switzerland, but at the moment they are considered unconfirmed, adds Peter Pushkarev.

The Bank of Russia buys gold mainly on the over-the-counter market. He began to participate in the auction at the Moscow Exchange last year.

“In order to develop an organized precious metals market and increase the number of counterparties, the Bank of Russia, starting from November 1, 2017, along with the purchase of gold on the over-the-counter market, will place orders for the purchase of gold at the Moscow Exchange trading on the GLDRUB_TOM instrument,” the regulator said in a statement …

The Bank of Russia will be present at the exchange for a very limited amount of time. As the Central Bank explains, after the publication of the results of the morning auction to establish gold prices by the London Association of the Precious Metals Market (10.30 GMT), purchase orders will be placed three times with an interval of 5 minutes at current market prices, but not higher than the ruble equivalent of the morning gold price.

At the same time, the Central Bank does not disclose the planned volume of purchases. The Bank of Russia explained that the regulator goes to the Moscow stock exchange in order to "increase the liquidity of trading."

Analysts generally support the Central Bank's strategy to increase the gold reserve, especially in the current conditions of confrontation with the West.

The Central Bank is actually replacing gold investments in US Treasury bonds, which have recently been falling in value and are a "toxic asset" for Russia because of geopolitics, says Sergei Suverov, director of analytical department at BC Savings Bank.

It should also be said that the share of gold in the international reserves of Russia is only 17.6%, which is very small compared to other developed countries like Germany, France and Italy, in which the share of precious metal is 2/3 of all international reserves, adds he.

The increase in gold in gold reserves looks logical, agrees Bogdan Zvarych, senior analyst at Freedom Finance.

In recent years, Russia has reduced the volume of investments in American debt instruments, and these funds themselves were transferred to other assets, in particular, gold. This is happening against the backdrop of an increase in the risks of some kind of action in relation to assets owned by the Russian Federation.

“The yellow metal, which is called“apolitical”and to a certain extent, will always be in demand,” the analyst notes.

In turn, Mikhail Krylov, director of the analytical department at Golden Hills - Kapital AM, urges to perceive the increase in gold purchases “just as an option to save and increase our international reserves”.

“Diversification and hedging will not hurt anyone, probably, there is no need to look for a signal in this that there will soon be a crisis or a wave of inflation,” he said.

In February of this year, Russia's investment in US government bonds totaled $ 93.8 billion, according to the US Treasury Department. It is 16th in the world. The main creditors are China and Japan. They owned securities for $ 1, 2 and $ 1, 1 trillion, respectively. In total, foreign central banks hold US Treasuries worth $ 6, 3 trillion.

According to Peter Pushkarev, it is reasonable to keep most of the reserves in the securities of economically developed countries or stable countries that are classified as developing ones. Part of the reserves can be transferred there from the USA, where securities give no more than 3% per annum, and more recently they gave 1.8% -2.0%. For example, to Europe, taking into account the growing and rather stable rate of the euro and the end of the "soft policy" there, to Australia, to Hong Kong, where the yield percentages are comparable to those from the United States.

In the near future, it is possible to consider options for investing a small percentage of reserves in the shares of the world's largest companies that are absolutely liquid - Apple, Google, Facebook and others, as, for example, the central bank of Switzerland does.

“But, unfortunately, it’s unsafe to invest a large share of reserves in our own economy: that’s why they are reserves, which should insure Russia in case of problems with the ruble or with the economy. But it is possible and necessary to think about investing a few percent of the reserves in economic incentives, in co-financing with promising projects in the field of both large and small and medium-sized businesses,”the expert notes.

Over the past year alone, Russia's foreign exchange reserves have grown by more than $ 70 billion, and if you use at least 1/10 of this growth, it is unlikely to damage the financial stability of the country, Pushkarev adds.