Russia Expanded Gold Reserves for 8th Month Amid Ruble Rout

Moscow (Dec 21)  Russia, the world’s fifth-biggest gold holder, added to its hoard for an eighth month even after having to use its international reserves on defending the ruble.

The gold stockpile rose to 38.2 million ounces as of Dec. 1 from 37.6 million ounces a month earlier, the central bank said today on its website. Its value in dollar terms fell by $85 million. Total reserves shrank by $9.7 billion in November to $418.9 billion, the lowest level since 2009.

“Physical volumes are increasing but their dollar value is not changing that much because the gold price has fallen,” Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow, said before the release. “Many central banks are buying gold since the price for gold has fallen.”

The central bank took advantage of lower prices to pad its gold holdings after tapping its reserves to stem the ruble’s decline before the currency crisis escalated this month. An emergency interest-rate increase this week failed to reverse the ruble plunge, stoking speculation that the monetary authority may sell gold to secure the hard currency it needs in the face of sanctions imposed over the conflict in Ukraine.

Gold declined 0.5 percent last month, reaching a four-year low on Nov. 7. The precious metal accounts for about 10 percent of Russia’s total reserves, according to the London-based World Gold Council. That compares with about 71 percent for the U.S. and 66 percent for Germany, the top bullion holders, the data show.

Ruble Decline

President Vladimir Putin has criticized the central bank for not acting faster to support the ruble, which has plunged since June as oil slid to a five-year low and sanctions hit the economy.

Russia’s November purchase of almost 19 metric tons follows an addition of a similar amount in October, according to data from the International Monetary Fund. The country has tripled its gold reserves since 2005 and now holds about 1,188 tons, the most since at least 1993. Data due to be released in January will show any changes in holdings for this month.

“I cannot imagine at all that Russia has sold gold or would sell gold, unless its foreign-exchange reserve are depleted,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by phone. “Gold is the final bullet, because gold is a store of value and outside of the dollar system and not subject to sanctions.”

Source: Bloomberg