Russia increases gold exports to 115 tonnes

Russia exported 115 tonnes of gold last year, mainly to the United Kingdom and Switzerland. According to calculations by Reuters that was seven times as many as the year before. The central bank bought much less gold in the past year, making more gold available for export. Also, since May last year, the Russian central bank has been bidding below the international gold price for new purchases. This makes it more attractive for gold mines and banks to export gold.

Russia has added hundreds of tons of gold to its reserves in recent years. In 2018, Russia added a record 273 tonnes of gold to its reserves, which meant that the central bank bought almost all of the domestic gold mine production of 310 tonnes. Last year, the central bank bought only 160 tons, leaving more gold for export. Most of this went to gold vaults in Switzerland and the United Kingdom.

Russia buys below the price of gold

The Russian central bank has been offering a fraction below the gold price which is set daily by the London Bullion Market Association (LBMA). For non-organized gold purchases, this discount increased from 0.05% in May to 0.12% in December over the past year. For organized purchases, the discount increased from 0.14% to 0.21% in the same period. That is about €5 to €10 per kilo below the international Gold price.

Russia currently has a gold reserve of 2,270 tonnes, good for a market value of more than €100 billion. This makes the precious metal the third largest reserve of the Russian central bank after the euro and the dollar. In 2018, Russia decided to use some of its dollar reserves Convert to Euros and Yuan. The gold stock represents about 20% of the central bank's total reserves at the current market price.

Russia exchanges dollars for euros and yuan (Source: Central Bank of Russia)

Gold mining sector

Russia is the third largest producer of the precious metal in the world, producing 310 tonnes of gold. The largest gold producer is China with a production of 400 tonnes, while Australia extracts just over 310 tonnes of gold from the ground annually. China's gold mining sector mainly serves the domestic gold market, while Australia exports much of its production abroad. A lot of gold from Australian mines ends up in China, India and various countries in Southeast Asia.

The gold mining sector of Russia has produced predominantly for the central bank over the past decade. Much of the domestic production disappeared directly into the central bank's vault. Now that the Russian government's appetite to buy has waned, there is more precious metal left for the private sector and abroad. The Russian government scrapped VAT on gold last year, making it more attractive for individuals to buy gold as well. It is expected that the domestic market for Physical Gold will grow strongly as a result.

This contribution was made from Geotrendlines