(Kitco News) - After a two-month hiatus the Central Bank of the Russian Federation jump back into the gold market, demonstrating that official demand remains strong, say analysts.
According to media reports, the Russian central bank bought 28 tonnes of gold in March, the biggest one-month purchase since September. In January the central bank sold 0.5 tonnes of gold and didn’t purchase anything in February.
The report noted, as of April 1, Russia’s official gold reserves stood at 1,128.3 tonnes, compared to the previous level of 1,207.7 tonnes. According to data from the World Gold Council, Russia has the fifth largest gold reserves in the world (not including reserves held by the International Monetary Fund).
Commodity analysts from Commerzbank explained that that a weakening Russian currency and higher gold price was probably the reason why the central bank didn’t buy gold in the first two months of the year.
“Because the ruble has appreciated significantly… and the local gold price has fallen accordingly, the Russian central bank has presumably decided to resume its gold purchases,” they said.
Jonathan Butler, precious metals strategist at Mitsubishi, said that the recent purchases is a positive sign for the gold market and “reinforces our view that central banks will be significant net gold offtakers in 2015.”
Julian Jessop, head of commodity research at Capital Economics, agreed that the latest Russian purchases continue to confirm the trend that central banks will be net buyers of gold in 2015. He added that the rationales for central banks to diversify their foreign reserves remain clear.
“[Emerging Market] central banks have been consistent buyers of gold for many years and there is no good reason to expect them to stop any time soon,” he said. “Of course, individual banks will dip in and out of the market at different times, depending on local circumstances, so I would be wary of focusing too much on who exactly is buying at any one point.”
The Russian central bank has been the single biggest buyer of gold and in 2014, according to data from the WGC, as they bought 174.8 tonnes of gold.