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Updated: Russia Continues to Boost Its Gold Reserves

By Neils Christensen of Kitco News
Monday December 22, 2014 10:45 AM

Editor's Note: The article was updated to include comments from Macquarie Research.

(Kitco News) - Russia has defied ongoing speculation that it has been forced to sell some of its gold reserves as it deals with a growing financial crisis.

On Friday news outlets reported that Russia added to its gold reserves for the eighth straight month adding 600,000 ounces of gold to its reserves. On Friday, Bloomberg reported that as of Dec. 1 Russia’s stockpile of gold rose to 38.1 million ounces up from 37.6 million ounces.

Vladimir Putin, President of the Russian Federation

Russia is accumulating gold as it dips into its foreign reserves to defend its weakening currency. The Russian ruble has lost almost 50% of its value since the start of the year as global economic sanctions for its annexation of the Crimea region along with weaker oil prices have destabilized the country’s economy.

According to data from the Russian central bank, the country’s foreign reserves, for the week ending Dec. 12, are valued at 414.6 billion dollars, which according to some reports is near a five-year low.

Earlier in the month some analysts speculated that Russia was selling its gold reserves, however others had doubts, noting the Russian government will probably want to sell U.S. dollars or get rid of their lower-yielding currencies and government bonds.

Edward Meir, commodity consultant for INTL FCStone, said the news is all-around good for gold.

“The fact that the Russians are not selling any gold to stem the loss in their shrinking foreign exchange reserves is important, as any sign that they are indeed doing so will be extremely destabilizing,” he said in a research note published Sunday.

Russia has been a significant bright spot for the gold market in 2014 as the central bank has almost tripled its gold reserves this year. According to the World Gold Council, with data compiled from the International Monetary Fund, Russia has purchased more than 126 tonnes of gold as of October.

The country’s economy is expected to contract and enter a recession in 2015; however Russian President Vladimir Putin has downplayed the economic weakness recently saying that he expects, in a worst case scenario, for the country to emerge from the recession within two years.

Although November’s data shows that Russia continued to buy some gold, some analysts are convinced this trend will continue. Analysts at Macquarie research wrote note published Monday, that Russia could be forced to slow is purchase of gold and other precious metals in the face of rising financial problems.

They added that it is unlikely the central bank will sell any of its gold holdings.

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By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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