Bank of Russia Is the World’s Largest Buyer of Gold
Russia is hoarding gold and the Russian central bank is now the world’s largest buyer of gold. But why?
In 2010, central banks around the world went from being net sellers of gold to being net buyers of gold. Following the U.S. financial crisis, central banks started to accumulate gold as a hedge against economic and political uncertainty. They also bought gold to back up their currency so it could compete against the U.S. dollar, which is the world’s reserve currency.
Since the 1970s, the U.S. dollar has been the world’s reserve currency used to trade oil and other commodities and products. This has created a huge demand for the U.S. dollar. But the U.S. Financial Crisis put the notion of the greenback as the world’s reserve currency into jeopardy.
If the world’s biggest economy can collapse then how safe is the U.S. dollar? To wean itself off dependency on an unstable currency, global central banks have been buying gold—none quite as fast as Russia.
In September, Russia’s central bank added 16.5 tons of gold to its stockpile. This represents the 20th straight month of that the Russia central bank has been the biggest buyer of bullion. Russia is now home to the seventh largest gold reserve in the world with 1.5 million tons of gold, representing 16.5% of the country’s total reserves.1
Russia’s economy has been in a tailspin since the U.S. and E.U. imposed sanctions on the country after it invaded Crimea back in March 2014. The sanctions were supposed to bring Russia’s economy to its knees.
Instead, Russia became better friends with China and has been weaning itself off the U.S. It has also been hoarding gold in an effort to shore up the ruble. The ruble, just like the U.S dollar, is a fiat currency, which means that it is money that is deemed legal tender but isn’t backed by anything.
Bank of Russia Strengthens Fiat Currency with Hard Assets
But Russia is changing that. The Russian government has been converting state rubles into gold assets. From 2006 to 2015, Russia’s state holdings of gold tripled.
Meanwhile, the U.S. continues to pile on the debt with no end in sight. The U.S. is currently $20.0 trillion in debt; it’s closer to $200.0 trillion when you factor in debt and unfunded liabilities like Social Security, Medicaid, unemployment, and food stamps.
If the U.S. economy crashes, countries around the world that are holding U.S. debt (in the form of bonds) will be left with worthless money. Countries, like Russia, that are hedging against this kind of economic uncertainty with hard assets like gold and silver will be in a much better position economically.
What does this mean for investors? Russia’s hoarding of gold will have an impact on everything from gold and silver to mining companies to currencies and commodities.
Learn-To-Trade.com, Toronto’s Leader in Stock Market Trading Courses
Learn-To-Trade.com is the oldest and leading provider of stock market trading courses in Canada. Led by licensed, industry professionals, Learn-To-Trade.com’s stock market trading courses can help investors of every skill level trade more confidently and profit consistently.
How? There are proven trading strategies that investors can use to profit no matter what the broader markets are doing. We can show you how to make money in bull markets, bear markets, when the markets are going sideways, and even crashing.
Learn-To-Trade.com’s stock market trading course will teach you how to read stock charts, about fundamentals, risk management, and capital preservation. You will also learn about stock options, stock index trading, futures trading, commodities trading, futures option trading, and FOREX trading.
Learn-To-Trade.com also has a unique Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.
To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at firstname.lastname@example.org.
- “Latest World Official Gold Reserves,” World Gold Council, last accessed November 17, 2016; http://www.gold.org/research/latest-world-official-gold-reserves.
Latest posts by George Karpouzis (see all)
- Market Review – November 2019 - November 13, 2019
- Canadian Economy to Slow in 2020 as Global Manufacturing Recession Takes Hold - November 12, 2019
- Bank of Canada Holds Rate Steady Despite Gloomy Economic Outlook - November 5, 2019