Additional ounces: Russia's gold reserves exceeded a record $200 bln
Russia's gold reserves have grown by a record 33% since the beginning of the year and by November exceeded $200 billion for the first time in the country's history, Izvestia has found out. The country took the fifth place in the reserves of this precious metal - it was surpassed only by the United States, Germany, Italy and France. Now it is the most reliable asset against the background that the RF savings in Western currencies are blocked. And its value is growing due to geopolitical uncertainty in the world - by the end of the year it may exceed $3 thousand per troy ounce, experts predict . What this means for the stability of the financial system of Russia - in the material "Izvestia".
Why Russia needs gold reserves
Russia's international reserves in gold reached $207 bln by the end of 10 months, as follows from the Central Bank's data (Izvestia has studied them). Since the beginning of the year, they have increased by 33%, which is the highest increase in the history of observations. A comparable level was observed only in 2016, but then the total volume was much lower ($64.5 billion).
At the same time, in physical terms, the volume of Russia's reserves in gold has remained virtually unchanged since the beginning of the year - it amounts to 75 million troy ounces (or 2.33 billion tons).
- The dynamics of Russia's international reserves in recent years is mainly due to market and currency revaluation and the Bank of Russia's operations with the National Wealth Fund," the Central Bank told Izvestia.
Thedata of the Bank of Russia reflect the growth of monetary gold value, said Nikolay Dudchenko, analyst of FG Finam. According to him, for a month to the beginning of November it rose in price by 4% to $2744 per troy ounce, - the reserves of the Russian Federation in monetary gold for the same period increased by a comparable amount.
The assets of the Russian Federation in the main precious metal look impressive against the background of other countries. According to the data of the World Gold Council (World Gold Council), which were reviewed by Izvestia, in the second quarter the Russian Federation was in the fifth place in the world in terms of gold reserves. Russia is ahead of only the United States, Germany, Italy and France.
International reserves consist not only of gold, but also of currency assets - euros, dollars and yuan. Their size since the beginning of the year increased by 5% and reached $631 billion, follows from the Central Bank data. The share of gold in them has risen to a third, although in early 2024 it only slightly exceeded a quarter. In terms of all gold reserves, Russia also ranks fifth, according to the data of the World Gold Council at the end of the second quarter. In this rating our country is overtaken by China, Japan, the United States and India.
The country's gold and foreign exchange reserves are a kind of a safety cushion for the state. It is built up in times favorable for the economy and spent in a crisis. International reserves help insure the risks of budget deficit and failure to fulfill social obligations, especially in conditions of economic difficulties, force majeure, sanctions or rising costs, said Freedom Finance Global analyst Vladimir Chernov. They are also used to stabilize the exchange rate and stimulate the economy.
At the same time, in 2022, the West blocked about half of Russia's foreign exchange reserves - about $300 billion. The reserves in gold and yuan remain liquid.
Russia has a safety cushion in assets that are not subject to sanctions, and reserves are formed on the basis of which of them cannot be used for sanctions pressure, the head of the Bank of Russia Elvira Nabiullina said last year. She added: the Central Bank is also working on the return of blocked reserves in dollars and euros.
Why the share of gold in Russia's reserves is growing
Under the conditions of continued and tightened sanctions pressure, gold has become more preferable for reserving, said independent expert Andrei Barkhota. Its prices do not change as quickly as the value of currency, and the overall resistance of this asset to sanctions is much higher. In addition, the Russian Federation is a major producer of gold and is self-sufficient in this resource.
The Russian authorities changed their approach to the formation of gold and foreign exchange reserves back in 2022 - after the freezing of Russia's foreign currency assets in dollars and euros, recalled Freedom Finance Global analyst Vladimir Chernov. The precious metal became a priority.
In addition, since the end of February 2022, the Central Bank has resumed gold purchases on the domestic market, Vladimir Chernov noted. As an example, one of the world's largest companies mining this resource - the domestic Polyus Gold - sells almost all volumes of produced precious metal on the domestic market of the Russian Federation: it is mainly the Bank of Russia that buys them.
The redistribution of the share of the RF reserves from currency to gold is most likely connected with the operations of the Ministry of Finance on the foreign exchange market, the expert explained. The Central Bank mirrors them in order to keep the ruble exchange rate from falling - as a result, the reserves in currency are reduced.
The authorities conduct major transactions with foreign currency on a daily basis, which affects its value. According to the budget rule, the Ministry of Finance has been buying foreign currency and gold from the market for 3.1 billion rubles a day since October. To keep the exchange rate from falling further, the Central Bank reflected these transactions and additionally sold yuan in the amount of 8.4 billion rubles, thanks to which the market receives foreign currency for 5.3 billion rubles daily.
Gold prices: by how much have risen, forecast
In general, the cost of gold has increased by 29% since the beginning of the year, follows from TradingView data. This is a very high growth rate - for example, in 2019, against the background of the COVID-19 pandemic, the precious metal only rose in price by 15%. For a conservative asset, which is usually not characterized by volatility, this is a colossal increase, said Dmitry Skryabin, analyst at Alfa Capital Management Company.
Gold prices have been rising recently against the background of general geopolitical tensions, said the chief economist of "BCS World Investments" Ilya Fedorov. In particular, it is actively purchased by the central banks of China, India and Turkey, said Dmitry Skryabin. The situation is fueled by the tension in the Middle East.
In addition, further reduction of the rate of the U.S. regulator may weaken the dollar, due to which gold will again be in the plus, he added.
Gold is one of the main strategic assets for both private investors and governments. Its market capitalization is about $18.4 trillion (Nvidia is in second place with a lag of several times, and Apple is in third place). At the same time, the precious metal does not have such risks as in the case of company securities. In addition, the asset is unlikely to depreciate, as it is in short supply - mining is limited by the physical resources of the planet.
As a result, the share of gold in the RF assets may continue to grow, if only because the cost of gold will also increase. By the end of the year, it may reach $2600-2700 per troy ounce against the background of the persistence of geopolitical risks, said Dmitry Skryabin of Alfa Capital Management Company. According to his forecasts, in 2025 there is a chance that the cost of gold will break new records and reach $3000 per ounce.
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