Russia buys more gold in October and SGE deliveries remain very positive

London (Nov 21)  The Russian Central Bank upped its gold reserves by yet another 600,000 ounces (18.7 tonnes) in October bringing its year to date total to 165 tonnes and if the buying pace continues in November and December it will take in 200 tonnes this year – a new record.  The previous record was in 2010 when it increased its gold reserves by 176 tonnes – so it is not far short of this already.

Interestingly Russia is announcing purchases at a higher monthly rate than China, the other big current gold buyer, but there have to be continuing doubts about the veracity of the Chinese figures judging by its prior non-reporting of its gold purchases for years at a time.  Since June it has been reporting its gold holdings increases on a  monthly basis for the first time, but prior to that there were five and six year gaps between reported increases.  The suspicion is that China only reports what it feels is expedient for Western nations to know, and many believe the real figures are far higher with increases in gold reserves being hidden in non-IMF-reportable accounts.

But there’s little or no doubt that overall Chinese gold demand as demonstrated by gold withdrawals out of the Shanghai Gold Exchange (SGE) remain very strong indeed.  The latest announced figures, for the week ended November 13th, saw a further 49 tonnes of physical gold drawn out of the Exchange bringing the year to date total to 2,259 tonnes.  This is 374 tonnes more than at the same time in the previous record year (2013) when the full year gold withdrawals total was 2,181 tonnes – already comfortably exceeded with around six full trading weeks still to go..

With Chinese internal demand remaining so high – and the Chinese and Russian central banks buying around 400 tonnes a year combined (possibly more if China is continuing to play statistical gold mind-games with the West) supply/demand fundamentals are going to be under pressure – even as the gold price continues to weaken ahead of the likely US Fed decision to start raising interest rates generally expected to happen in December.  One should have expected the likely interest rate decision to have already been accounted for in the weaker gold price, but the longer the decision has been postponed the more the adverse effects of a forthcoming increase seem to have on gold.  Perhaps the actual event will lead to a more stable gold price environment with the fundamentals beginning to play a more important role from then on with continuing uncertainty taken out of the equation.