Another Big Increase In Russian Gold Reserves In November

| About: SPDR Gold (GLD)
This article is now exclusive for PRO subscribers.

Summary

After a record boost to its gold reserves in October, the Russian central bank rfeports another big 31.1 tonne increase in Novcember.

Russia has consistently been building its gold reserves for the past 10 years.

Russia holds the world's sixth largest official gold reserve and is the world's third largest gold producing nation.

After a record gold reserve increase in October when the Russian central bank added 1.3 million troy ounces - just over 40 tonnes - it has announced that it has followed this with a one million ounce - 31.1 tonnes - rise in gold reserves in November. This brings its total officially reported gold reserve holding to a little over 1,600 tonnes, keeping it in sixth place among national holders of gold.

Table: Top 10 national Gold Holding Nations as reported to IMF (adjusted for latest Russian figure)

Position

Country

Gold Reserve (tonnes)

% of Forex Reserves

1.

USA

8,133.5

75.3%

2.

Germany

3,377.9

69.5%

3.

Italy

2,451.8

68.4%

4.

France

2,435.8

66.2%

5.

China

1,842.6

2.3%

6.

Russia

1,614.2

16.5%

7.

Switzerland

1,040.0

6.1%

8.

Japan

765.2

2.5%

9.

Netherlands

612.5

64.1%

10.

India

557.8

6.1%

Note: Holdings areas of October 2016 for most countries as reported to IMF. Russian holdings updated as per latest central bank announcement.

Source: IMF, lawrieongold.com

The Russian central bank has been by far the largest known regular buyer of gold globally in the past year. Indeed Russia has been building its gold reserves pretty consistently for the past 10 years as can be seen from the chart below from Nick Laird's excellent goldchartsrus.com website.

The Russian, Chinese and Kazakh central banks have been the most consistent gold buyers this year and between them account for the greatest reported amounts of gold flowing into central bank coffers in 2016 to date. But there have also been sellers - notably Venezuela to help alleviate some of its foreign debt problems - so the total increase in central bank holdings in the calendar year is likely to end up well short of analysts' estimates of 400-500 tonnes made in early 2016. China has also been cutting back the volume of its reported purchases this year, although the gold community always expresses doubt with respect to the true size of China's gold holdings, many believing that they may be several times the 1,842.6 tonnes it currently reports to the IMF.

There is a group of key commentators like Jim Rickards and James Dale Davidson who appear to believe that a Chinese and Russian led group of nations - around 50 of them - are getting together to come up with an alternative to the US dollar as the global reserve currency and that gold holdings will be a key element in this. They comment that the US has amassed huge benefits from the dollar's role as the key global trading currency and that if this role can be substantially reduced it will lead to a huge downturn in the US economy and a market crash. Their warnings are so dire that they should perhaps be treated with some caution, but there is little doubt that elements of what they are putting forward are already coming about, although any likely consequences may have been over-exaggerated.

But certainly President Putin's Russia does seem to believe in gold as a counter to the dollar and as it builds its gold reserves it also appears to be liquidating some of its huge holdings in US Treasuries, even though its own economy is a little precarious due to Western sanctions and the fall in the price. However the recent pick-up in the latter may be alleviating some of its problems. oil Only recently Pravda reported that Russia would have to sell some of its gold to allay current account deficit problems - see: Russia may have to sell gold to boost current account but as suggested at the time that doesn't seem to have affected its central bank buying program which has now seen the largest two month period of total purchases on record. However, Russian is the world's third largest gold producer and vies with Australia for second place. Its mines produce around22 tonnes of gold a month on average so there is scope for both gold buying and gold sales from the country's own output alone.

Top 20 Gold Producing Nations (tonnes) - 2015

Rank

Country

2014

2015

Change yoy

1.

China

462.0

460.3

-0.4%

2.

Australia

274.0

273.8

-0.1%

3.

Russia

264.7

268.5

+1.4%

4.

USA

210.8

214.0

+1.5%

5.

Peru

171.1

170.5

-0.4%

6.

South Africa

168.6

167.5

-0.7%

7.

Canada

151.2

157.2

+3.9%

8.

Mexico

112.7

133.2

+18.2%

9.

Indonesia

93.8

113.0

20.5%

10.

Brazil

91.6

95.0

+3.7%

11.

Ghana

106.3

94.7

-10.9%

12.

Uzbekistan

83.5

85.5

+2.4%

13.

Kazakhstan

49.2

63.7

+29.5%

14.

Argentina

60.0

63.5

+5.8%

15.

Papua New Guinea

60.7

58.4

-3.8%

16.

Tanzania

50.8

51.7

+1.8%

17.

Mali

52.8

50.1

-5.1%

18.

Colombia

47.0

44.0

-6.4%

19.

Philippines

40.4

41.1

+1.7%

20.

Chile

44.5

41.1

-7.6%

Rest Of World

558.1

564.4

+1.1%

Global Total

3,153

3,211

+1.8%

Source: Metals Focus, LawrieOnGold

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.