Vladimir Putin seeing gold: Is Russia readying itself for economic war?

Is Russia boosting its gold stockpiles in anticipation of a possible economic war with the West?

Russia accounted for 59 per cent of net gold purchases by central banks in the third quarter of 2014, according to data from the World Gold Council.

Russia, Kazakhstan and Azerbaijan have all taken advantage of a subdued gold market, for which demand eased by 2 per cent in the quarter. The WGC has attributed this to an increasing effort to diversify away from the US dollar.

Ever since the financial crisis Vladimir Putin’s government has been increasing its gold holdings.

UBS resources and mining analyst Jo Battershill said the third quarter results were not surprising.

“If you were to go back over the last four to five years, all those countries have been pretty consistent buyers in that period,” he said.

“There is a genuine argument for a lot of countries to diversify out of US dollar dominated foreign reserve holdings. It’s not a bad thing given the volatility we’ve seen in currency markets.”

“We see lots of comments in the media about Russia potentially starting another Cold War, and if that is something genuinely occurring I think having a bit of other diversification would be deemed a logical outcome.”

Mr Battershill said the actions of both Russia and China over the last two to three years is indicative of where the longer-term trend is going.

“Russia is commodities rich, China is relatively commodities poor. So given the countries border each other there is a natural trade that should occur between those countries, and at the moment all those commodities are priced in US dollars,” he said.

“I think the ongoing trend will be for further diversification from US-dominated foreign currencies. You just feel there are some odd moves, fairly significant trades on the paper gold market that would lead you to believe it’s an interesting market.”

Full article: Vladimir Putin seeing gold: Is Russia readying itself for economic war? (The Age)

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