Russia buys most gold since Soviet break-up in ’14 at 152 tns

Otmane El Rhazi from The Bullion Desk.

Russia bought more gold in 2014 than in any year since at least the break-up of the Soviet Union, according to GFMS estimates.

Russia acquired 152 tonnes in the first 11 months of last year – purchases after April averaged almost 20 tonnes per month, it said in its Gold Survey 2014.

“[Russia has] stepped up the pace and consistency of buying as the geopolitical events have increased instability and [its] desire to shift away from dollar dependency and to provide some support to the beleaguered rouble,” it said.

The inflow of gold coincides with a consistent decline in the rouble, which hit an all-time low in December 2014 at 79.52 against the dollar, as the price of oil and Western sanctions battered the Russian economy. The rouble has since recovered to around 67.5 after several interventions by the Russian central bank.

The slump in oil prices to around $45 per barrel from nearer $110 at the start of 2014 has also weighed – western sanctions have deliberately targeted the oil and gas industries, which account for upwards of 40 percent of the Russian government’s income.

Russia is world’s sixth-largest holder of gold at 1,187.50 tonnes, accounting for 10.8 percent of its total reserves, the World Gold Council said in its January update.

GFMS estimates global official sector purchases/sales at net 461 tonnes in 2014, up an estimated 13 percent on the previous year, with gross purchases estimated at 511 tonnes, up 17 percent.

“We would not view this increase as a function of lower prices but instead it is more reflective of geopolitical events and the strength of the US dollar/weakness of some domestic currencies,” it said.

Other CIS countries also bought metal in sizeable quantities – Kazakhstan bought 46 tonnes, partly through regular purchases of domestic gold output, and Azerbaijan an estimated 10 tonnes. Other major acquirers were Iraq at 48 tonnes in the first half of the year and Mauritius at four tonnes.

“The woes of domestic currencies was also part of the rationale motivating some of the other major purchasers, namely Iraq and Mongolia,” the report said.

Almost 40 percent of gross purchases – or more than 200 tonnes – were accounted for by undeclared transactions.

Gross sales from the official sector rose substantially in 2014 to 50 tonnes, which GFMS attributed to two factors: Ecuador’s swap transaction with Goldman Sachs, which saw holdings drop 14 tonnes, and Ukraine, which sold nearly 19 tonnes, predominantly in October.

Germany sold roughly three tonnes for its official coin programmes, it added.

GFMS estimates are based on a combination of IMF data, central bank websites and the firm’s own field research.

(Editing by Mark Shaw)

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