Russia liquidates nearly all its holdings of US debt & invests money in gold

Russia liquidates nearly all its holdings of US debt & invests money in gold
The Central Bank of Russia has continued getting rid of US Treasury bonds in August. The share of Russian investments in American debt is getting close to zero.

Russian investments in US securities as of August have fallen to just $14 billion. Back in 2011, Russia was one of the largest holders of US debt with a $180 billion investment.

The reason is not only about politics and US sanctions against Russia, a broker at Otkritie bank Timur Nigmatullin told RIA Novosti. The US Federal Reserve is hiking interest rates, which makes American bonds cheaper, he said. “Russia has almost dropped out of the list of holders of US government debt, being the 54th largest holder.”

“A further sale of US Treasury bonds by Russia will most likely be compensated by buying gold and opening short-term deposits at banks,” he said. The share of precious metals in the country's foreign reserves has reached a record 18 percent, closely approaching the share of dollar investments.

The largest investors in US debt, China and Japan, have also cut their holdings. Chinese holdings of US sovereign debt dropped to $1.165 trillion in August, from $1.171 trillion in July, marking the third consecutive month of declines. Japan has slashed its holdings of US securities to $1.029 trillion in August, the lowest since October 2011.

The reason for holding money in US bonds is global trade, which is still dominated by the dollar, director of macroeconomic analysis at Expert RA Anton Tabah told Izvestia daily. So, countries are forced to have a lot of dollars in cash, and US bonds are the best option for that.

India and Turkey have followed Russia's lead. Turkey has dropped out of the top-30 list of holders of American debt, while India has been liquidating its investment for five consecutive months to $140 billion in August.

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