Putin’s nation may have stopped buying gold for a few months, but as the ruble has regained some of its lost value, Russia is back in a big way.
After ceasing gold purchases in the first two months of 2015, Russia has reemerged as a big buyer in March, purchasing roughly 30 tonnes. This has brought the central bank’s gold reserves to a total of 1,238 tonnes, making it the fifth largest official reserve in the world.
The Telegraph’s Andrew Critchlow speculates that the continuation of purchases may be due to the ruble’s recent turnaround. The last time Russia bought gold in such quantities was September of 2014, right before the dispute between Russian president Putin and the West, which brought the ruble to the brink of collapse.
Ultimately, last year’s ruble crisis would force Russia’s central bank to raise their interest rate to 17%, as both Europe and the U.S. placed sanctions on the country in the wake of its actions in Ukraine. The fall of oil – a commodity on which Russia has shown heavy reliance – also played a big part in the national crisis.
The ruble has been partially restored, however, as the currency has recently enjoyed a 27% appreciation against the dollar. This, combined with the upcoming reduction of the central bank’s interest rate to 12%, might have very well been the catalyst that brought Russia back on the path of amassing gold.
Regarding Russia’s financial situation, SEB’s chief emerging markets strategist Per Hammarlund noted: “The conditions that required the exceptional rate are no longer there.” He also added, “The
central bank needs to stem the appreciation of the ruble as it eats into government revenue from oil.”
Russia has certainly taken advantage of lower gold prices in recent times, as they have now tripled their gold holdings over the last decade; 13% of the country’s currency reserves lie in the precious metal. Some believe that Russia might be looking to utilize the safety of gold as the nation prepares for a lengthy economic conflict with the West.
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