Will Russia Set a New Record in Buying Gold Reserves?



Russia buys gold

Precious metals are sliding, and gold has fallen 9.4% on a year-to-date basis. The demand for physical gold in 2015 has been on the rise. Since gold lovers prefer buying the metal when prices are sliding, demand has been higher than 2013 figures.

The Central Bank of Russia increased its gold reserves by almost 18.7 metric tons in October. The year-to-date figure stands at 165 tons. The highest rise in gold reserves in Russia was in 2010 when the amount was 176 metric tons. In case the demand for reserves stays on the rise in the current year, it could break the country’s 2010 record. Interestingly, Russia is announcing purchases at a higher monthly rate than China, another gold-buying country.

As gold prices continue to weaken ahead of the likely Fed decision in December to raise the interest rate, the demand remains strong in China. The demand for precious metals in China seems to be less impacted by the to-hike or not-to-hike decision.

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Driving factor

The Chinese and Russian central banks together are buying about 400 metric tons of gold per year. The demand and supply dynamics may end up under pressure with rising Russian and Asian demands. The fall in precious metals seems inevitable, and the only driving factor for the year seems to be the hike in rates.

The rate hike phenomenon is not only a driving factor for precious metals but also for ETFs with prices linked to these metals. These ETFs include the Global X Silver Miners ETF (SIL) and the Sprott Gold Miners ETF (SGDM).

Mining companies that have followed the same route as precious metals are Yamana Gold (AUY), Iamgold (IAG), and Coeur Mining (CDE). These three stocks make up 5.7% of the VanEck Vectors Gold Miners ETF (GDX).


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