Russia, whose gold reserves had been looted in the era of Yeltsin, now buys a lot of gold abroad and became the second in the world gold-producing country (after China). One hundred percent of the domestic purchase of gold, notes economist F. Engdahl, significantly supports the mining industry. Gold bet not only Russia and China, but also Kazakhstan.
American economist, independent journalist, writer and political scientist, author of several well-known books and research Frederick William Engdahl speculates on the theme of gold. His article publishes the portal Mixednews.ru.
The analyst recalls that during the financial crisis of the 1930s, Central banks and citizens preferred to keep their savings in gold, as paper money is devalued. According to Engdahl, the world is moving today “to another, similar to a stage”: because debt dollar system reduces the real value of paper dollars. And already noticeable, as the Central banks are buying up all the gold, “which can overpower”.
Later President Nixon at the urging of the then Deputy Minister of Finance of the USA Field Volcker and his patron David Rockefeller has deprived the dollar of statutory gold standard. Nixon took this step because of gold bullion at the fed had less of: France, Germany and other trading partners the USA claimed gold in exchange for their accumulated dollars, and it was permissible under the Bretton Woods rules. Since 1971 mass of paper dollars in the world money circulation unrestrained increased. “That’s what caused the era of the great inflation, which continues in the world economy for over fifty-five years, because the dollar weight during this time has grown rapidly and has now reached 2,500 percent since 1970,” writes the economist.
In October 1973 Secretary of state Henry Kissinger spoke about the “petrodollar”. In fact since the value of the dollar was guaranteed by gold and oil. Thanks to the manipulations of Kissinger and the rest of the oil price in 1973 rose by 400 percent. These manipulations forced Germany, France and in General most of the world to buy dollars. Since then, Saudi Arabia and other OPEC countries began to demand from the Germans, the French and others in payment for the black gold only American dollars.
Since September 2014, world oil prices began to fall rapidly. “It was a 70% decline of demand in dollar terms in the world’s largest commodities denominated in dollars,” explains the analyst.
And it turned out that the Central banks of Russia and China are rapidly acquiring gold. Moreover, the people’s Bank of China announced that it is abandoning binding of national currency to the US dollar in favor of a basket of currencies led Euro.
While everyone’s attention was riveted on the price of oil, Russia’s Central Bank bought gold in huge quantities. Difficult in 2015, Russia added to gold reserves 208 tons, higher than in 2014 (172 tons).
And what else is interesting: the Russian Central Bank to buy gold sells Treasury securities of the USA, and is “de facto means the de-dollarization”.
And again, after the announcement of the Chairman of the Central Bank of Russia Elvira Nabiullina in may 2015 that it sees no need to buy all the gold of domestic production (because the Central Bank needs can be met on the international market), was made a 180 degree turn, and today the Central Bank is buying all mined in Russia gold. Only in those cases where this gold is not enough for performing monthly procurement plans, it has resorted to imports. Itself Nabiullina said that “we believe it is necessary from the point of view of creating an additional financial pillow of security for the state in the face of external uncertainty”.
The economist further stressed that Russia (a country whose gold reserves “were plundered during the reign of Boris Yeltsin”) has now become the second in the world gold producing country after China.
The article notes, and a substantial build-up of gold reserves Kazakhstan. In the past forty months the Republic was increasing its gold reserves. While Kazakhstan is in the Eurasian economic Union.
As for the Russian partner of China, he in January of 2016 with 17 tons of gold and intends to replenish its reserves by the end of the year at 215 tons, i.e. approximately the same extent as Russia. From August 2015 to January 2016, China increased its gold reserves by 101 a ton. According to the statistics of the people’s Bank of China, with 2009 the volume of gold reserves in the country grew at 57%. Analysts believe that the amount of gold in the vaults of the people’s Bank of China “is undervalued from a political point of view”.
According to the expert, currencies of Russia, China and some other Eurasian countries strive to become “as safe as gold”. By the way, Russia has an exceptionally low ratio of external debt to GDP ratio: about 18% compared to 103% in the US, 94% in the Eurozone, more than 200% in Japan. And this fact is deliberately ignored by Western rating agencies. “Russia has a much healthier economy than most Western countries, trumpeting about its economic collapse,” summarizes Engdahl.
Proportion of gold reserves in gold and foreign currency reserves (ZVR) Russia is beginning to play a more significant role than foreign exchange component. This is evidenced by models constructed on the basis of the data of the Central Bank of Russia, said the portal “Financial One”.
Buying gold in significant amounts, the Central Bank may be much faster to build up reserves to comfortable levels indicated at $ 500 billion., however, under one condition: the precious metal will continue to rise.
Analysts remind that in the beginning of this year there was a historic event for the Russian economy: the country’s foreign reserves have become less correlated with the US dollar, and thus significantly increased their correlation with the gold price. This is due to the policy of the CBR to build reserves at the expense of gold. In the end, the weight of the latter in gold reserves begins to play a more significant role than the monetary component.
The reason for that may be the geopolitical situation. The Central Bank began to buy the precious metal after the Crimean events. The correlation has strengthened and the rising price of gold (in the beginning of 2016, it has increased in price by 18% compared with the lows of December 2015).
According to “World Gold Council”, which leads portal, in July-December of 2015, the Bank of Russia bought a record domestic producers 139,49 tons of gold. High rate of procurement is maintained for the second year in a row. As the emission center of the ruble, the Central Bank of the Russian Federation “can easily increase its gold reserves by buying it from Russian miners”.
Elvira Nabiullina said that a “comfortable” level of foreign reserves for Russia — more than $ 500 billion. Now this indicator is at $ 383,5 billion. Continued growth in gold prices will help you carry out the required level faster. And if this goes on, analysts say, the wealth of the Russians in the long term “will depend not only on oil but also on the gold prices on the world market”.
According to “World Gold Council” in March 2016, which leads to “the Newspaper.ru”, the world’s largest reserves of monetary gold have USA — they own 8,134 tonnes. In second place — Germany (3,381 thousand tonnes). Third place goes to the international monetary Fund with 2,814 tons. In Italy and France and 2,436 2,452 thousand tonnes respectively. Followed by China (1,779 tons), Russia (1,436 tons) and Switzerland (1,040 tons). The list of those who own a thousand and more tons of gold ends.
The simple answer to the question about the increase of Russian gold reserves gave the financial Ombudsman (defender of rights) Pavel Medvedev. “Russia acts primarily in the interests of domestic mining companies, he said “Komsomolskaya Pravda”. — Supports producers afloat, by buying gold. Plus seeks to reduce dependence on foreign currency. Primarily from the us dollar”.
We buy gold and there are critics, notes “the Russian business magazine”. The opponents remind of the relatively low liquidity of the precious metal because the sale involves the need to move weighty goods. In addition, the preparation of the sale of large party of gold speculators will notice and rush to crash the prices. As a result, the transaction will be less favorable.
Is mentioned separately and the price volatility of gold: since 2011 the prices for this metal fell by more than a third. However, the long-term trend shows that the price of gold since the beginning of 2000 has increased more than four times.
By the way, in anticipation of devaluation of the dollar, which is predicted by some Western economists, the buildup of foreign exchange reserves in gold instead of dollars, too, looks reasonable decision.
Surveyed and commented Oleg Chuvakin
