MOSCOW, August 16, Natalia Dembinskaya. The share of gold in Russia's international reserves has reached 29.8 percent, worth a record $179.6 billion. This is fifth place in the world. Why precious metals were given such a significant role — in the material .
Record price
In April there were 175.9 billion, in three months almost four more have been added.
Of course, the rise in price of precious metals had an effect first of all: by 20 percent since January. And in general — from 1850 dollars per ounce (in January 2021) to 2450.
«It was the growth in quotations that ensured records in value terms and share in gold and foreign exchange reserves. In the international market, in turn, gold rose in price mainly due to increased demand from central banks seeking to diversify reserves in the context of geopolitical challenges and trade wars,» explains Anatoly Vozhov, Deputy Chairman of the Board of Rosdorbank.
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Gold allows the country not only to maintain macroeconomic stability and not devalue the ruble, but also to earn decent money, adds Alexey Vyazovsky, an expert in the precious metals market. And although this income is largely accounting, if absolutely necessary, it can be used to circumvent sanctions (for example, through swaps with India or China), he emphasizes.
In the top five
According to the Bank of Russia, the gold and foreign exchange reserves as of August 1 were $602.05 billion (as of July 1 — $593.5 billion). This is the maximum since March 2022. The share of precious metals is 29.8 percent, the highest since January 2000 (then it was 31.2).
In recent years, the structure of international reserves has changed significantly. Back in mid-2021, the dollar was excluded from the National Welfare Fund (part of the gold and foreign currency reserves), and later the euro was «zeroed out». Now the gold and foreign currency reserves (in addition to the frozen ones) are balanced approximately 50 to 50 between gold and foreign currency — mainly the yuan.
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The largest holders of monetary gold in the world are the United States (8,133 tons), Germany (3,353), Italy (2,452), France (2,437). Russia moved up to fifth place last fall. At the moment, the state has 2,336 tons — a record in the modern history of the country.
Strategic Tasks
Gold is a powerful insurance policy, primarily against geopolitical and sanctions risks.
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"By increasing the share of precious metals in reserves, the Central Bank is not guided by the principle of obtaining excess profits. The regulator is forming a strategic reserve that ensures the stability of the national economy. This is a guarantee of overcoming any negative scenarios: from new sanctions to a global economic crisis," says Boris Bogoutdinov, managing partner of the consulting company "2B Dialog".
«A kind of safety cushion,» adds Anton Balanov, an economics and sociology adviser at the Russian Academy of Natural Sciences. «Gold can be used for financial interventions to support the national currency. In addition, the precious metal insures against inflation as a reliable asset that retains its value in the long term, unlike currencies that are subject to many risks.»
Finally, solid gold reserves demonstrate the power and independence of a country in the international arena, raising its status and strengthening its negotiating positions.
General trend
Russia was not the only country buying gold — global central banks were actively doing this all last year, increasing their reserves by 1037 tons.
Another 483 tons were added in the first half of the year, five percent more than in the same period of 2023. The reasons are the same: global instability, crises and mistrust of the dollar.
After the freezing of Russian assets, everyone realized that no one is immune from this. Many countries have embarked on the path of de-dollarization of the economy, moving away from the American currency both in international settlements and in reserves.
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The current share of precious metals in Russian gold and foreign exchange reserves corresponds to the optimal level — 20-30 percent, analysts say. However, they do not rule out that the importance of gold as an economic stabilizer will grow. At the end of 2022, the Ministry of Finance already raised the threshold for possible reserves to 40 percent.
Such a strategy is entirely justified while maintaining restrictions on diversification in foreign currencies to 50 percent, says Pavel Paevsky, Head of the Macroeconomic Credit Analysis Department at RSHB Asset Management LLC.
Russia can easily increase its gold reserves to three thousand tons, like Germany. This will strengthen confidence in the ruble, especially in anticipation of the launch of the digital analogue, notes Vyazovsky.
However, sharp jumps are not expected — flexibility and liquidity of gold and foreign exchange reserves are important for monetary policy.