Russia has been buying gold in quantities not seen since the break-up of the Soviet Union.
Last year, the country accounted for one-third of central banks’ gold purchases amid escalating tensions with the West and a collapse in the value of the ruble, the Financial Times reported Friday.
Central banks around the world bought a net 461 tons of gold in 2014, about 13 per cent higher than the previous year and the second-highest since the collapse of the gold standard in 1971.
Russia’s shopping spree of the yellow metal was driven by a desire reduce its reliance on the US dollar and provide support to the beleaguered ruble.
Russia’s currency has lost half its value against the greenback in the past year on the back of plunging oil prices as well as western sanctions over Moscow’s support of Ukraine separatists.
The central bank’s foreign currency reserves, mainly US and European government bonds, have also fallen.
“There is no attraction for the Russians to be doing anything which is helpful to the US and Europe,” said Ross Strachan of GFMS, a metals research group at Thomson Reuters, which compiled the figures.
“Given the sanctions… gold is one asset which it can purchase which doesn’t do that.”
Russia’s central bank bought 152 tons of gold worth US$6.1 billion at today’s prices, up 123 per cent from the previous year.
That was just in the first 11 months of 2014, according to GFMS estimates.
Analysts said Russia’s purchases might have been due to the buying of domestically produced gold that could not be easily sold overseas due to sanctions.
“This is a clear positive for the gold price,” said Matthew Turner, analyst at Macquarie.
“If central banks had not purchased that gold it would have been bought by private investors or jewellery consumers, and this would likely have required a lower gold price.”
While Russia was a strong buyer this year, analysts say purchases could slow and the country could become a seller if it continues to liquidate its reserves to support the domestic currency.
– Contact us at [email protected]