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Russian central bank asked to resume gold purchases to help miners

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(Kitco News) Russian banks are asking the nation’s central bank to restart its official gold purchases that were halted on April 1, citing concerns over gold exports amid disruptions in the transportation industry due to the COVID-19 outbreak.

The main problem centers around the selling of Russian gold abroad due to fewer cargo flights available, which is raising transportation costs.

Russian banks are “facing problems” when trying to export gold, Vasily Zablotsky, the head of the National Finance Association, a non-government lobby group of Russian banks, told Reuter this week.

If Russian banks are not able to sell gold bought from miners, then they will either have to stop buying or raise the limit held in their own vaults, Zablotsky said.

Russian central bank announced in March that it halted all of its official gold purchases starting April 1. "Further decisions on gold purchases will depend on how the situation develops," the bank said.

Analysts cited COVID-19 challenges, including high volatility, the oil-price war involving Russia, and the nation’s economic outlook. 

Russian central bank has been a dominant force in the gold market, consistently buying more and more of the yellow metal for the past three years. In 2019 alone, the central bank bought 158.1 tons, according to the World Gold Council’s data.

The Russian lobby group said it is simply bringing up its concerns. Zablotsky added that the group also wants to ask the central bank to start accepting gold as collateral when it comes to refinancing of banks’ debts as well as creating gold swap deals for ruble liquidity.

Russian gold miners are not seeing a major impact on sales from the COVID-19 outbreak just yet, stating that they is a lot of demand from London amid a temporary shutdown of a number of mints and refineries across the globe. “I do not see any drama in this,” a top-manager at one Russian gold miner told Reuters.

One banker disagreed with the miners: “There is a bottleneck,” the source said. “Even with high fares, it is hard to find the aircrafts.”

Russia is the third-largest gold producer in the world. And its top gold buyers are the nation’s own central bank, the U.K. and Switzerland. In 2019, Russia produced 10.1 million ounces of refined gold. Out of that total, Russian central bank bought 5.1 million ounces and Britain and Switzerland bought 3.7 million ounces.

In the first two months of 2020, before the coronavirus outbreak halted majority of flights around the world, Russia saw increased demand from the U.K., according to local media reports.

During the January-February period, 17 tons of gold worth $854 million were exported abroad, mainly to Britain,, reported citing Federal Customs statistics. This number is at least seven times higher than last year’s activity. The sellers of Russian gold have been local banks of all sizes, the report added.

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