Russia Agressively Adding to Their Physical Gold Position
Russia, seeking to protect itself from a dollar crisis, continues to reduce its holdings of US Treasury bonds while beefing up its gold stock at an accelerated pace.
The Bank of Russia, the central bank, bought 8.8 million troy ounces of gold in 2018, increasing its total gold holdings by 14.9 percent.
Russia is serious about gold
Although its economy is only about 13 percent the size of China’s, with its latest purchases, Russia has now surpassed China to become the world’s fifth largest holder of gold.
Russia’s disinvestment in dollar instruments and emphasis on gold reserves is in part a response to the US-driven sanctions regime. Gold, Russians note, is not subject to political interventions the way paper money or government securities are. Russian president Putin has said the US dollar monopoly is “not reliable.”
Russia has made gold production a priority and is now the third largest world gold producer, after China and Australia. The United States is fourth.
In a recent post I noted that gold is still the real reserve currency of the world and cited as evidence the rush of central banks to build their gold reserves ahead of the coming crisis.
Total foreign holdings of US government debt securities exceed six trillion dollars. The largest of those foreign creditors of the US are China and Japan, each with more than a trillion dollars of US debt securities.
The threat of both increased trade conflict and militarized disputes between the US and China is very real. In that case, as the Russian example illustrates, rising tensions carry the very real prospect of massive Chinese disinvestment in the dollar and accelerated purchases of gold – the only real alternative to their dollar holdings.
In that case, gold’s dollar price will climb to unimaginable heights.
All bets are off!