Russia dumps U.S. debt for gold

Russia sold its U.S. Treasuries on a large scale in April, according to latest Figures which the Federal Reserve made public last Friday. The total U.S. debt position halved from just over $96 billion to just $48.7 billion, the lowest level since March 2008. This move is striking, because Russia has never before sold so much US debt in one month.

The Treasuries sale could be interpreted as an attempt by the central bank to support the value of the ruble, but that is not the case, according to Danske Bank economist Vladimir Miklashevsky. In a statement to Bloomberg he says the sale of the debt has more to do with a different allocation, as Russia's reserves are still growing across the board.

More reserves in euros and gold

Russia benefits from an increase in the price of oil and gas and can therefore build up more reserves. During an interview for Austrian television, President Putin said that 40% of the reserves are now held in gold and euros. For example, with a market value of more than $80 billion, the gold reserve is now larger than the total reserve in US government bonds.

In recent years, Russia has added precious metal to its reserves on a large scale and will continue to do so this year. In May, the central bank bought an additional 600,000 troy ounces (~18.6 tons), further growing the total gold supply to more than 1,928 tons. That is more than 17.5% of the total reserves. Last year, the country added a record 223 tonnes of gold to its reserves, and this year the central bank looks set to continue that pace.

In May, the governor of Russia's central bank said it Buy gold diversification of reserves. After all, the precious metal is free of counterparty risk and cannot be hindered by economic sanctions. With a looming trade war between the major economies, the precious metal seems to be an attractive alternative for central banks.

Russia disposed of a large part of its dollar reserves in April