Yesterday U.S. President Barack Obama warned Russian President Vladimir Putin that Russia would face more sanctions if it moved further into eastern Ukraine after its annexation of Crimea. Worryingly for residents of New York and for financial markets, Obama also warned that he was more worried about the risk of a nuclear bomb going off in Manhattan then he was about Russia.
Geopolitical risk in the form of terrorism, financial and economic war and actual war remains high and should support gold.
Russia has increased its gold holdings by 7.247 tonnes to 1,042 tonnes in February. Turkey and Kazakhstan also raised their bullion reserves, data from the International Monetary Fund showed today. Turkey’s gold holdings rose 9.292 tonnes to 497.869 tonnes, the data showed.
Many analysts are ignoring the important context of today’s new geopolitical backdrop. Russia alone has some $400 billion in foreign exchange reserves – mostly in U.S. dollars. If they were to diversify just 5%, worth some $20 billion, of those reserves into gold – it would be equal to nearly 500 tonnes of gold or nearly 25% of global annual production.
Russia bought another 7.247 tonnes of gold in February. It will be interesting to see what Russian demand is in March and indeed in the coming months. Sanctions could lead to materially higher demand from the Russian central bank, Bank Rossii.
This would cause a material strain on the already fragile supply demand dynamics of the physical gold market. The possibility of a default on the COMEX gold exchange would become more likely, with a consequent surge in the cost of gold coins and bars and a difficulty of securing physical gold either in
allocated gold accounts or for delivery.
China imported about 1,158.16 tonnes from Hong Kong alone in 2013, more than double its 557.48 tonnes in 2012, according to data from the Hong Kong government.
China, the world’s biggest gold buyer, does not publish trade data for gold and there is the possibility that demand was even higher.Official sector demand from the People’s Bank of China is not declared and is not reflected in these figures. Nor are direct imports into other cities such as Shanghai from gold producing nations and countries that have seen rising gold exports in recent months such as the UK and Switzerland.
This has been due to large London good delivery bars (400 oz) being shipped to Switzerland from bullion banks in London to be refined and cast into smaller kilo bars for the Chinese and Asian market.
Full article: Russia Raises Gold Holdings By 7.247 Tonnes To Over 1,040 Tonnes In February (Gold Core)