Russian Central Bank buying Gold on the International market?

For a number of years now and even more so during 2018, the central bank of the Russian Federation, the Bank of Russia, has remained in the spotlight as one of the world’s largest gold buyers, each month adding substantial amounts of gold to its monetary gold stockpiles.

Having bought another 37.3 tonnes of gold (1.2 million ounces) during November, and Bank of Russia now holds 2103 tonnes of monetary gold. On a year-to-date basis (for the 11 months from January to November 2018), the Russian central bank has added an incredible 264.3 tonnes of gold to its monetary reserve assets.

From January to November 2018, the Russian central bank has added 264.3 tonnes of gold to its reserves. Source:

A key feature of the Russian gold market is that the Bank of Russia has a policy of sourcing its gold from domestic gold mining companies by using large Russian commercial banks such as Sberbank and VTB Bank as intermediaries. Continue reading…


As the pace of Russian central bank gold accumulation continues to speed up, the ability of Russia’s large commercial banks to source enough gold from domestic gold mine supplies to satisfy the central bank’s golden appetite will hit a wall. Luckily for the central bank, these Russian ‘bullion banks’, such as Sberbank and VTB, already have the experience and trading infrastructure in international gold markets to source gold bar supplies elsewhere, such as in Zurich and London.

Within this context, Russian central bank gold buying should be expected to have an impact on the available gold inventories (stocks) in international gold markets. The former closed-loop of Russian central bank gold buying, from Russian mine to Russian commercial bank to Russian central bank, will therefore not be as clear cut as previously. For examples of this closed loop see BullionStar article “Does the recent spate of Central Bank gold buying impact demand and price?“.

Bank of Russia gold buying may therefore start to have a greater impact on the demand – supply dynamics of the world’s physical gold markets. As to whether it will have any impact on the ‘international gold price’, which is established in the synthetic and fractionally backed London OTC and COMEX gold markets, is debatable.

Given that these paper gold markets trade vast quantities of paper gold, many multiples more per day than the total physical quantity that central banks buy in an entire year, there will only be a shift in gold price discovery once a critical mass of market participants demands physical delivery or a future event erodes investor confidence in London OTC and Comex.

This analysis has not looked at the possibility that the Bank of Russia sources some of its gold purchases from other stockpiles that might be held by the Russian Federation’s “State Fund of Precious Metals and Precious Stones” aka the Gosfund, operated by the ‘Gokhran‘. Maybe the Russian central bank can top up its gold requirements in this way but since the Gokhran will not comment on its dealings in this area, its difficult to know. Another possibility is that the Russian Federation mines gold directly through secretive state-owned gold mines whose existence is not in the public domain and then transfers some of this output to the Bank of Russia.

The Russian central bank could, like other central banks, use the services of another central bank to top up its gold buying, such as the gold trading desks of the Bank for International Settlements (BIS), Bank of England, Banque de France or Federal Reserve of New York. But again, since all of these institutions are ultra secretive about their gold trading activities, its difficult to know.

One thing that seems fairly certain though is that any gold the Bank of Russia buys on the international market would be quickly repatriated to Russia, as the Russians by policy do not store any gold abroad.



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