– Gold is a “100% guarantee from legal and political risks”
– Russia’s central bank buys another 300,000 ounces in April
– Russia views its overseas assets as vulnerable
– ‘De-dollarisation’ continues across Asia
– Gold offers protection from growing risks today
Russia’s central bank once again increased its gold holdings substantially in April. They added another 300,000 ounces to their existing stockpile bringing the total up to 40.1 million ounces (see chart below).
It marks the continuation of a policy which was only slightly affected by last year’s rouble crisis following the collapse in the price of oil and Western imposed sanctions.
In an address to Russia’s lower house, a senior policy maker at Russia’s central bank indicated that while gold prices fluctuate they offer invaluable insurance against external factors. Dmitry Tulin, manager of monetary policy said,
“The price of it swings, but on the other hand it is a 100 percent guarantee from legal and political risks.”
Reuters reports that western sanctions “have not targeted government assets abroad” to date and suggest that Russia’s reduction of its exposure to U.S. Treasury bills is a symptom of its fear that state assets will be targeted next.
Of course, Russia’s reducing of its Treasury bill holdings may also be part of the policy of de-dollarisation which Russia and China are energetically pursuing. As may the insatiable appetite of their central banks for gold.
Countries across central Asia continue to buy gold eagerly. The government of Kazakhstan banned the export of mined gold and is stockpiling its reserves – although its current holding of 200 tonnes is dwarfed by those of its Russian and Chinese neighbours.
Gold is absolutely central to monetary policy in Eurasia and Asia. China openly refer to their yuan as “the reserve currency of the world”. While this ambitious slogan may be slightly premature it is likely that by backing the yuan with gold it would become a major reserve currency that would challenge the debt-bloated dollar.
Investors would be wise to take heed of Russia’s attitude to gold as a “100% guarantee”. In the crisis that approaches physical gold held outside the banking system in safe vaults in safe jurisdictions will prove to be such a guarantee to individuals, companies, pension funds, family offices, as well as nations.
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MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,187.85, EUR 1,088.07and GBP 770.64 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,194.00, EUR 1,095.56 and GBP 774.77 per ounce.
Gold fell $19.30 or 1.6 percent yesterday to $1,187.70 an ounce. Silver slipped $0.36 or 2.11 percent to $16.74 an ounce.
Gold in Singapore for immediate delivery was up 0.3 percent at $1,189.65 an ounce while gold in Zurich fell to $1,185.96.
Gold held near a two week high after dipping in the prior session when positive economic data hinted that the U.S. economy may be picking up. The U.S. business investment spending plans increased for its second consecutive month in April and consumer confidence moved upward along with new U.S. home sales that increased last month.
The positive U.S. economic data fuelled the U.S. dollar’s rally which ramped up to an eight year high against the beleaguered Japanese yen.
Greek finance ministers and creditors continue bailout negotiations today. Its payment of 1.6 billion euros is due to the IMF next week and government sources indicate that the nation may not be able to make the payments without a deal.
The ECB kept the cap on emergency liquidity assistance Greek banks can draw from the country’s central bank unchanged at 80.2 billion euros, a banking source told Reuters on Wednesday.
The lack of any solid progress in recent talks has pushed European equities lower yesterday, with the FTSE 100 falling 80 points. Emerging market equities slumped to six-week lows, with sentiment poor due to concerns about the Chinese and indeed the global economy.
In late European trading gold was at $1,186.10 an ounce down 0.19 percent. Silver was at $16.71 an ounce off 0.21 percent, and platinum was at $1,123.90 an ounce down 0.04%,
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