Russia Passes China To Become The World’s Fifth Largest Hoarder Of Gold

There seems to be a race for who’ll buy the most gold or which country will have the biggest gold reserve. China has been leading that pack for some time, but according to a report by Bloomberg, Russia has just passed China to become the country with the largest gold reserve (or one of the top five countries?) Russia just bought 20 tons of gold to raise its total hold reserve to 1,857 tons. China’s gold reserves are reported to be at 1,843 tons. That means Russia has 14 tons more gold than China!

Russia has been consistently buying gold every month since March 2015. This is seen as a move by the country to reduce its dependency on the dollar and to diversify its foreign investments. The World Gold Council reports that Russian gold reserves were 224 tons in 2017 and this year would mark the third consecutive year that those reserves have been above 200 tons. Now gold accounts for 17% of Russia’s foreign assets. Chinese gold bullion only accounts for about 2.5% of the country’s reserve assets. However. China is the biggest producer and consumer of gold. The gold in China cannot be exported which makes it tricky to be accurate about how much gold China actually has. It could be more than what is reported.

Russia is the third largest producer of gold. The central bank purchases two-thirds of the gold mined in Russia. Having more gold in the government’s coffers helps Russia to grow its economy and assert its independence from the US dollar in the wake of sanctions imposed by the US government and its allies.

The President of Russia, Vladimir Putin has made it clear that he will not tolerate western influence on Russian politics. By hoarding gold, he is reducing the country’s exposure to the dollarized financial system that the entire western world follows. The Bank Central Bank of Russia has gone as far as trading with some powerful nations directly by swapping gold for their sovereign currencies, removing the US Dollar from trade deals completely. Then again the hoarding of gold may be for an entirely different reason. Maybe Russia is sensing some impending financial crisis in the west.

Gold would be a safe bet during uncertain times. Gold as an asset is independent of government control which might be appealing to a country like Russia that is faced with international financial sanctions.

After the fallout on Crimea in 2014, Russia began increasing its gold reserves. Now they stand at 75% since then, and growing.

As previously mentioned China is also amassing a lot of gold, but they have been vocal about decoupling themselves from the international US dollar system. If ever there was a universally accepted currency, whose value remains the same regardless of where it comes from or goes to then gold would be it. Russia and China are big proponents of a gold-based trading system and through alliances with BRICS countries which include Brazil, Russia, India, China and South Africa; they could succeed in dethroning the all-mighty US dollar.