Russia Dumps U.S. Dollars and Buys Gold As “Safety Metal”

(Bloomberg) — Vladimir Putin’s quest to break Russia’s reliance on the U.S. dollar has set off a literal gold rush. Within the span of a decade, the country quadrupled its bullion reserves, and 2018 marked the most ambitious year yet.

And the pace is keeping up so far this year. Data from the central bank show that holdings rose by 1 million ounces in February, the most since November.

The data shows that Russia is making rapid progress in its effort to diversify away from American assets. Analysts, who have coined the term de-dollarization, speculate about the global economic impacts if more countries adopt a similar philosophy and what it could mean for the dollar’s desirability compared with other assets, such as gold or the Chinese yuan.

French President Emmanuel Macron said in an interview with CNN in November that European corporations and entities are too dependent on the U.S. currency, calling it “an issue of sovereignty.” Last year, Poland and Hungary surprised analysts by making the first substantial gold purchases by a European Union nation in more than a decade.

For Russia, experts are starting to question whether it can afford to keep up its intense pace of buying. Some say the country will import more gold to guard against geopolitical shocks and the threat of tougher U.S. sanctions as relations between the two powers continue to deteriorate. Gold buying last year exceeded mine supply for the first time. Still, others argue that Russia’s bullion demand.

“Should it reach the limit for domestic purchases, I think the central bank will start to import gold,” said Oleg Kouzmin, chief economist at Renaissance Capital in Moscow and former adviser in the central bank’s Monetary Policy Department. Given the geopolitical risks, it’s likely the central bank will keep increasing gold’s share of reserves, he said.

A representative for Russia’s central bank declined to comment on its gold purchases.

One thing that could keep Russia’s dollar reserves at high level is the country’s dependence on exporting commodities, like oil which are denominated in the greenback. Three-quarters of the nation’s annual $600 billion of trade is in dollars.

Central bank buying has helped “strengthen gold from a weak hand to a strong hand” and supported gold prices in recent years, according to Ronald-Peter Stoeferle, managing partner at Liechtenstein-based asset manager Incrementum AG.

Bullion has risen more than 20 percent since the start of 2016.


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News and Commentary

Gold tops 1-week high on dollar weakness, pause in stocks rally (Reuters.com)

Gold pokes back above $1,300 as U.S. dollar, stocks slump (MarketWatch.com)

Investors hit pause as ECB and Brexit risks loom (Reuters.com) Stocks edge higher as crude oil gains (Reuters.com)

Gold prices hit one-week high as dollar turns lower (Reuters.com)

Trump’s Fed Picks Have Fond Memories of the Gold Standard (Bloomberg.com)

Indian government keeps trying to paperize its people’s gold (Gata.org)

Crude Oil Nearing Resistance – Could A New Top Form Here? (24HGold.com)

David Rosenberg: Fed Will Embrace ‘Helicopter Money’ In The Next Few Years (ZeroHedge.com)

Gold Prices (LBMA PM)

08 Apr: USD 1,297.10, GBP 993.58 & EUR 1,154.29 per ounce
05 Apr: USD 1,288.90, GBP 985.11 & EUR 1,147.51 per ounce
04 Apr: USD 1,291.60, GBP 981.87 & EUR 1,149.78 per ounce
03 Apr: USD 1,291.85, GBP 980.38 & EUR 1,148.84 per ounce
02 Apr: USD 1,287.20, GBP 984.97 & EUR 1,148.95 per ounce

Silver Prices (LBMA)

08 Apr: USD 15.14, GBP 11.60 & EUR 13.47 per ounce
05 Apr: USD 15.19, GBP 11.63 & EUR 13.53 per ounce
04 Apr: USD 15.08, GBP 11.48 & EUR 13.44 per ounce
03 Apr: USD 15.16, GBP 11.51 & EUR 13.49 per ounce
02 Apr: USD 15.02, GBP 11.51 & EUR 13.42 per ounce

Recent Market Updates

– ‘No Deal’ Brexit Risk Impacting UK and Irish Economies – Gold Gains On Recession Concerns
– America’s “Debt Crisis Is Coming Soon”
– Russia Buys 1 Million Ounces Of Gold In February – Become Your Own Central Bank
– 5 Ways to Prosper In the Coming Crisis – Goldnomics Podcast
– Deutsche Bank and Commerzbank May Become EU’s “Too Big To Fail” Bank
– Happy Saint Patrick’s Day from GoldCore
– 188 Internet Shutdowns In 2018 Show Why Physical Gold Is Ultimate Protection
– Buy Gold as Basel III Means “Central Banks and Banks Are Going To Be Buying Gold”
– Invest In Gold Or Bitcoin – Which Is The True Store Of Value?

Mark O'Byrne

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