Wednesday, June 30, 2010

Heavy Gold Buying by Russian Government

Whatever " very valuable" information  alleged Russian spy "Cindy Murphy"  reported back to Russia about gold, it sure hasn't dissuaded Russia from adding to its gold holding. In fact, if anything, Russia has become an even more aggressive gold buyer.

In May, Russia’s gold assets expanded by 22.46 tons. Russia increased holdings to 703.1 tons in May, from 680.64 tons, and has added gold every month since at least February, according to IMF data.

Russia isn't the only governmant buying gold. Central banks and governments added 425.4 tons to their holdings last year to 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show


  1. Wenzel,

    What are your thoughts on why other central banks are accumulating gold? What does carrying gold on their balance sheet do, insulate them from a dollar crash? Do you believe any of them are considering partial or full backing of the currency with gold?

  2. It looks like many people are also looking up to Gold now. I am not wondering because it gives a profit.

  3. @ Taylor Conant

    They don't trust the dollar. A dollar crash will only come because of severe price and monetary inflation, everyone under those conditions will be running to gold.

    Gold backing may be tossed around, but the U.S. still has too much influence. I expect a basket of currencies perhaps with some gold.

  4. Paper money is just that "paper" keep in mind the dollar bill is printed on the same paper as the $100.00.

    The more they buy the closer we are to the 'end'.

  5. Wenzel,

    Why do the central banks even need to hold reserves, such as gold? To clear their exchanges with each other? Because they obviously are never going to "settle" a redemption with an individual currency holder, ie, you can't, as a ruble holder, trade it in for some gold and US dollars.

    Would reserves even be necessary with a global central bank?

  6. @taylor Conant

    This is not about reserves. This is about acquiring real buying power if the Fed super inflates.

  7. Wenzel,

    Pardon the repeated questions, not trying to be difficult or even play DA, just trying to learn. Two questions as follow-up:

    1.) As per my earlier question, what good are reserves to central banks if they don't actually have redeemable/backed currencies?

    2.) What do they need buying power for? To continue swapping trash onto their balance sheet? Why can't they just issue their currency, or why wouldn't they? (Avoid their own mass inflation?)

  8. If all hell breaks loose and the major currencies crash in value, say a billion dollars worth drops in buying power to one tenth its current buying power (100 million), then if the Russains, say, need wheat from China, wouldn't China be willing, perhaps insist,on doing the exchange in gold? (A commodity that is unlikely to lose, under these circumstances,90% of its value)

    Further, you are thinking that things are going to remain too much the way they are now where the U.S. and Russia can just print up money. What if they can't, especially for international trade? At such point "Them that have the gold make the rules." Russia understands this.

  9. Wenzel,

    The Russian central bank will buy Chinese wheat with their gold? Is this normally how central banks intervene in international trade?

  10. @Taylor Conant

    Again you are thinking "normal". Do you buy bread now with your gold? The Russians are buying gold for the same reason you are. If paper money globally goes into a hyper inflation where "Them with the gold make the rules"

  11. Gold Buying has been on the rise lately because of the demand of it in the market. What I love about gold is it is not affected by the stock market crashes.