Russia adds 26 tonnes of gold to reserves

The central bank of Russia again has a lot of gold in its reserves in November added. According to the latest figures, the central bank bought 900,000 troy ounces of gold last month, equivalent to almost 28 metric tons. With this purchase, the total size of Russia's gold reserves rises to almost 1,829 tonnes, which is against the current Gold price represents a value of approximately $76 billion.

Since the beginning of this year, Russia has added about $40 billion to its reserves as the country rakes in more revenue due to the rise in oil and gas prices. Most of that extra revenue goes to the foreign exchange reserves, but the country also bought a substantial amount of gold this year. Including November's purchase, this year's total amounts to a record amount of more than 214 tonnes.

Russia buys 900,000 troy ounces of gold

The central bank of Russia has been systematically buying gold since 2006 and now has the sixth largest public gold reserve in the world. Especially since 2014, the country has given a higher priority to expanding this strategic reserve, which may be related to the Western financial sanctions against Russia following the events in Ukraine.

Owning a substantial gold reserve makes countries less vulnerable to sanctions, as the precious metal can be traded under any circumstances and worldwide. When Iran was cut off from the international payment system by Western sanctions a few years ago, the country came up with an alternative route via Turkey. The income from the oil came in there and was converted on the Turkish gold market to Gold bars. That gold then crossed the border into Iran.

A gold stock is not only an insurance against political risk, the precious metal also offers protection against currency risk. If, for whatever reason, currency reserves become worthless or unusable, the precious metal can always be used as a kind of backup.

Buying gold via the stock exchange

The central bank of Russia also bought gold for the first time via the Moscow gold exchange in November. What effect this has had on the local gold price is difficult to say, because we have not been able to find any details about the amount of gold that has been purchased in this way. Normally, central banks buy the precious metal directly from other parties, so that their transactions do not have a direct impact on the price of gold.

There are several explanations why Russia are now also buying gold on the public market. One of the reasons given is that Russia cannot obtain enough gold through other channels, but it is also possible that the central bank wants to support the domestic gold price. If the price of gold in Russia is higher than in the global gold market due to central bank purchases, this will eventually result in more gold flowing from abroad into the Russian gold market.