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Russia is Top Gold Accumulator in Last Decade

Release Date: 
Tuesday, February 12, 2013

Gold was slightly higher today despite a stronger dollar following news of a nuclear test in North Korea.  Gold was $1.80 higher at 11:15 a.m. Pacific Time on the New York Spot Market, at $1,651.10 per ounce.  Spot silver was $0.08 higher at $31.13 per ounce.  (Click here for the most current spot prices.)

Gold was supported as investors acquired the traditional safe haven asset on reports of seismic activity in North Korea indicating a possible nuclear test, according to Sue Trinh, strategist at RBC Capital Markets. The South Korean Defense Ministry said the tremor appeared to be a nuclear test.  Later, the South Korean government stated North Korea had advised the U.S. and China of the test in advance.

Russia has added 570 tons of gold to its reserves in the past decade, 25% more than the next largest acquisition by China, according to the International Monetary Fund. Russia’s policy of gold reserve accumulation is ongoing, helped along by President Putin.   Putin told Bank Rossii, the Central Bank of Russia, not to “shy away” from the metal. “After all, they’re called gold and currency reserves for a reason,” Putin said, according to a Kremlin transcript.

With more than five years left in Putin’s term, Russia plans to keep on buying gold. “The pace will be determined by the market,” Bank Rossi First Deputy Chairman Alexei Ulyukayev said. “Whether to speed that up or slow it down is a market decision.”

President Putin believes the U.S. has been abusing its dominant position in global trade through the dollar being the world’s primary reserve currency, debasing its value through its quantitative easing programs for advantageous trading.

Quantitative easing by major economies to support financial asset prices is driving demand for gold in the emerging world, said Marcus Grubb, head of investment research at the World Gold Council. Before the crisis, central banks were net sellers of 400 to 500 tons a year.  Now, led by Russia and China, the official sector purchases about 450 tons, Mr. Grubb said, “a very significant switch, and obviously a very positive one for the gold market.”

(Sources: “Gold futures steady near $1,650 an ounce,” Marketwatch, February 12, 2013; “Putin Turns Black Gold to Bullion as Russia Outbuys World,” Bloomberg, February 11, 2013; “Putin banking on gold,” Mineweb, February 11, 2011)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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