Gold as a reserve: the Central Bank of Russia has stopped buying metal

Of its decision, the Bank of Russia (the Central Bank) notified on 30 March. Details were not disclosed, but market participants only to inform that the

“further decisions on the purchase of gold will be taken depending on the development of the situation in the financial market”

From the data of the Central Bank, it follows that at the beginning of March the share of gold in its international reserves accounted for 21%, and foreign currency assets – 79%. The last official data on this topic is presented as of March 20. It follows that for the previous week the international reserves of the Central Bank decreased by $29.8 billion (5,1%) to $551,2 billion the Predominant reason for this was, as noted in the press release of 26 March, the impact of negative currency and market valuation.

According to Russian analysts, the Central Bank actively bought gold in 2014, becoming the largest buyer in the world. For the period 2014-2019 were bought almost 40 million Troy ounces of this metal. But in 2019 the volume of purchases fell below the previous low for this period has come for 2014 to 5.1 million ounces.

And in 2020 by the Central Bank in January-February was acquired only 0.6 million ounces. However, due to the decline in foreign exchange reserves, the share of gold in assets of the Bank exceeded 20%, which increases their dependence on the fluctuations in the prices of this metal and is in conflict with objective of diversification of the international reserves of Russia. In addition,

buying gold on the domestic market leads to an increase in ruble liquidity and ultimately creates additional inflationary pressure.

Another thing – it exports, which gives an increase in foreign exchange earnings. Last year, gold exports from Russia jumped by 8.2 times to $5.7 billion, and in absolute terms – by $5 billion.

Kazakhstan national Bank is granted the exclusive right to purchase gold from domestic producers, which he actively uses. In the end, at the beginning of March the share of gold in its total reserves made up of 67.9%. In absolute terms, in comparison with the beginning of 2019, the amount of this component increased by 41.1%, while foreign currency assets of the national Bank decreased by 1.7 times.

While the current dynamics of the price of gold be skewed towards this asset allows the Bank to safely account for the condition of his gross reserves

Not sounding the alarm on this issue, and the IMF and international rating agencies. For example, the Agency Standard & Poor’s affirmed long-and short-term sovereign credit ratings on the Republic of Kazakhstan on liabilities in foreign and national currency at BBB-/A-3 with Outlook stable. S&P analysts believe that in the next two years of fiscal and economic indicators of Kazakhstan will remain strong.

billion U.S. dollars

042da5fc40ec0d26b4796441beb0c1ee - Gold as a reserve: the Central Bank of Russia has stopped buying metal

Source: Bank of Russia, national Bank of Kazakhstan

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