Russia’s central bank has been the largest buyer of gold in the past few years as President Vladimir Putin seeks to break reliance on the U.S. dollar as relations between the countries remain strained. If Russia did need to tap its gold holding, it would fetch a hefty price — the metal is heading for the best year since 2010 as the U.S.-China trade war hurts global growth and central banks ease monetary policy.
“Russia prefers to cushion its macroeconomic stability through politically neutral tools,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki. “There is a massive substitution of U.S. dollar assets by gold — a strategy which has earned billions of dollars for the Bank of Russia just within several months.”
Not all of Russia’s moves are paying off. Last year, the central bank shifted about $100 billion of U.S. holdings into euros, yuan and the yen, and since then the Chinese currency has dropped. Russia also missed out on the rally in U.S. Treasuries. Russia may keep buying gold to compensate for those other losses in its reserves, said Kirill Tremasov, a former Economics Ministry official and now director of analysis at Loko-Invest in Moscow. So far it’s working, with gold up 18% this year to $1,513 an ounce.