• 57 days Could Crypto Overtake Traditional Investment?
  • 62 days Americans Still Quitting Jobs At Record Pace
  • 64 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 67 days Is The Dollar Too Strong?
  • 67 days Big Tech Disappoints Investors on Earnings Calls
  • 68 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 70 days China Is Quietly Trying To Distance Itself From Russia
  • 70 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 74 days Crypto Investors Won Big In 2021
  • 74 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 75 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 77 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 78 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 81 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 82 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 82 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 84 days Are NFTs About To Take Over Gaming?
  • 85 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 88 days What’s Causing Inflation In The United States?
  • 89 days Intel Joins Russian Exodus as Chip Shortage Digs In
Is It Time To Pay Attention To Gold Miners?

Is It Time To Pay Attention To Gold Miners?

The invasion of Ukraine by…

U.S Targets Russian Gold Stockpiles

U.S Targets Russian Gold Stockpiles

In its latest round of…

Linas Jegelevicius

Linas Jegelevicius

Baltic Times

Linas Jegelevicius is a veteran Lithuanian editor and freelance journalist, and the editor-in-chief of the Baltic Times newspaper, the longest running English print news outlet…

Contact Author

  1. Home
  2. Commodities
  3. Precious Metals

Russia Ditches U.S. Dollar For Gold As Tensions Rise

Putin

Russia‘s U.S. dollar reserves have shrunk from $96.1 billion in March to just $14.9 billion in May, according to the Russian Central Bank. Its governor, Elvira Nabiullina, says the decision will help protect the Russian economy and diversify the bank’s reserves.

Back in March, Russian President Vladimir Putin called the monopoly of the U.S. dollar “not reliable enough and dangerous for many”.

Notably, the Bank of Russia has been buying gold every month since March 2015, overtaking China as the fifth-biggest sovereign holder of gold.

Russia added 500,000 ounces of gold (15.55174 tons) to reserves in June and bought some 106 tons of gold since the start of the year, with total reserves now approaching the 2,000-metric-ton mark. Last year, Russia added a record 224 tons of gold to the reserves.

The U.S. is still the largest owner of metal, followed by Germany--8,134 and 3,374 tons, respectively.

Both political and economic reasons prompted the Russian central bank‘s decision.

First, mindful of geopolitical tensions, the regulator has apprehensions that Russia-owned treasuries can be frozen. Ironically, the recent meeting between Trump and Putin, not only failed to ease tensions, but amped them up, with some American legislators calling for tougher sanctions against Russia.

The Russian central bank hinted that it could invest the money from the USD sale not only into gold, but also into International Monetary Fund (IMF) bonds and Chinese bonds.

Related: Is This The Answer To High Gasoline Prices?

In periods of global financial or political crises, gold is much more useful than securities or cash, although gold is also prone to price fluctuations.

Russia's liquidation of its U.S. Treasury holdings has had an insignificant impact on the dollar, fo far. Instead, it’s China—the world's largest holder of U.S. Treasuries (about $1.2 trillion)--that has the most power to impact the dollar rate and the yield of US bonds.

With Russian experts lauding the central bank‘s decision, some warn however that gold prices could be manipulated on the market like oil.

 “In the event of a global decline in the interest of large sovereign investors in US Treasury bonds, an increase in speculative activity in precious metals in order to artificially lower their market valuation can be expected,” a Russian expert told RT.

The upbeat prognosis of Russia‘s gold mining industry also boosts the central bank‘s confidence that buying up gold is the way to go.

Related: China’s Debt Bomb Is Finally Detonating

“Our gold mining industry is very well developed and it is ready to supply gold. That is why our attitude towards here is based upon diversification of our reserves,“ Nabiullina was quoted as saying.

The Russian gold mining industry has almost doubled its volume of extraction over the last two decades and looks forward to registering new records soon.

In 2017, Russia extracted 8.8 million ounces, accounting for 8.3 percent of total global production. The newly discovered gold deposits will reportedly allow miners to increase extraction by half in seven years. By 2030, extraction is expected to grow by nearly eight million ounces. The increase could make Russia the world's second largest producer of the precious metal.

By Linas Jegelevicius for Safehaven.com

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment