Gold Buying Russia To Intensify Diversification On Trump ‘Unpredictability’?

Russia’s massive and increasing gold bullion reserves are kept in tightly-guarded locations across Russia due to the fear of sanctions and the ‘unpredictability’ of Donald Trump according to The Sun and Russia Beyond The Headlines.

Russia increased their gold reserves by a very large 199.1 tonnes in 2016. This was the eight consecutive year of gold diversification due to concerns about the dollar and currency wars

From The Sun:

Russia is hedging its bets with a stockpile of gold due to Donald Trump’s “unpredictable” nature.

The hoard, which is stashed around Moscow, St Petersburg and Yekaterinburg, has seen Russia become one of the world’s leading gold buyers – a stance that it hopes will protect it from any drastic changes that the new US President might have on the world economy.

Almost two-thirds of the nation’s gold is kept in Moscow, in a Central Bank repository.

The location of the gold, mainly in bullions weighing from 100grams to 14kgs, is a highly-guarded secret.

But the country’s leader, Vladimir Putin, has inspected one of the storage sites, with Prime Minister Dmitry Medvedev also having carrying out visits.

Russia’s central bank has previously declared that gold was a “100 per cent guarantee from legal and political risks”, making it worth the risk of a swinging price, GoldCore reported.

Russia’s gold reserves now rank sixth in the world. Putin has been photographed a number of times visiting gold reserves

From Russia Beyond The Headlines:

The topic of gold reserves is increasingly discussed in the international media. Donald Trump, for example, suggested an audit of America’s gold reserves to ascertain just how much the country truly has. The question of Germany’s gold reserves, kept in the U.S. for decades, has begun to worry the German public, which begins to think it’s necessary to return those reserves home. So, it’s no surprise that many Russians also wonder what’s up with their country’s gold reserves and where they’re hidden.

Russia ranks sixth in the world in gold reserves, and the Russian Central Bank said they total 1,614.27 tons, which is 15 percent more than last year.

The Russian Central Bank is one of the world’s leading gold buyers, and in February 2016 it purchased more than 10 tons of gold.

“When prices are low governments increase gold reserves, and this often owes to traditions and historical reasons,” said Anton Tabakh, an economist and professor at the Higher School of Economics. “In the reliability-liquidity-profitability triad, gold is marketable but prices greatly vary.”

Experts positively view Russia’s determination to increase gold reserves during global economic uncertainty. Konstantin Sakharovsky, who worked many years as director of innovations at a large Russian jewelry retail company, believes that a Trump presidency means gold will have more significance.

“Increasing the share of gold reserves is a very good decision in today’s economic and political climate,” said Sakharovsky, who links the increase demand for gold to the political risks tied to the election of the new U.S. president.

“Trump is unpredictable,” said Sakharovsky. “There could suddenly be a new wave of sanctions and a freezing of assets. Gold will help Russia maintain its assets …”

Russia has been diversifying into gold since before the global financial crisis and views it as a safe haven asset and a hedge against a devaluation of the dollar and indeed the beleaguered euro.  This is something we wrote about as long ago as 2007 – see here. Thus, Russia was buying gold long before Trump’s election.

Given relations between Trump and Putin are quite good, the question now is whether Russia continues to diversify its reserves into gold.

We think it will. If relations between the U.S. and Russia remain good, it may continue buying at a slightly lower rate. However, if relations were to deteriorate as seems quite possible given tensions over Crimea, Syria, Iran etc, then Russia and indeed China will likely accelerate their gold reserve diversification program to protect against currency wars and actual wars.

Gold will help all investors, savers, family offices, companies, institutions and indeed nations protect, grow and “maintain” their assets as currency wars intensify in the coming months and years.