Gold Reserves of Russia on Track to Surpass Those of China

The world’s central banks all store physical gold. They do so as a hedge against inflation, to maintain a hard asset on their books with universal value, and as backup against the possible debasement of their currency. Many nations also do so as a holdover – an institutional habit – from the now-dissolved Bretton Woods agreement of 1944. This agreement was an ambitious attempt to set up an international monetary order among the United States, Canada, Japan, Australia, and the nations of western Europe.
Gold Reserves of Russia
Although President Richard Nixon effectively ended it when he ordered the U.S. dollar to float free of gold, the International Monetary Fund (IMF) and the dollar as the world’s reserve currency serve as the Bretton Woods Agreement’s legacy.
Still, paper money makes central banks uneasy. The lessons of Weimar Germany, Zimbabwe, and, more recently Venezuela, are too difficult to ignore. And now, with President Trump beating the drum about China’s manipulation of its currency, gold is a natural insurance against financial disaster for any central bank.
Yet China seems to have taken a breather in its gold purchases, and Russia is playing an impressive game of catch-up. According to London-based writer Lawrence Williams, Russia could soon surpass China as the world’s fifth largest national holder of gold.
IMF records show that Russian gold reserves are dragging those of the Chinese by only 200 metric tons. As of January, Russia can boast 1,645 metric tons of the yellow metal as compared with China’s 1842.6 metric tons. If Russia keeps up its pace of gold purchases, and the Chinese continue to ease up on theirs, Russia stands to outdo China by the beginning of the fourth quarter of this year.
Russia is the third largest gold producer right behind China and Australia. After a recent bout of international sanctions against that country because of its military actions in Ukraine in addition to a recent decline in oil prices, the Russians are faced with a debasement of their ruble and other challenges to their economy. And now that China is calling for the IMF to include gold in its basket of currencies that serve as Special Drawing Rights (SDR), Lawrence Williams feels some will argue that gold should be treated as a currency. If this happens, Russian Premier Vladimir Putin, a known lover of gold, could be sitting in the catbird seat.
One thing seems even more certain, though. Both Russia and China would love to see the U.S. dollar toppled from its kingpin role as the world’s reserve currency. And as these countries accumulate more of the shiny metal, their international influence toward that end becomes more assured.
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