Bank of Russia resumes gold buying amid sanctions
The Central Bank of Russia announced it is resuming purchases of gold on the domestic market after a two-year pause. The move comes after the regulator and several of the country’s major banks fell under Western sanctions amid Russia’s military operation in Ukraine.
It is estimated that more than half of the country’s foreign exchange reserves, around $400 billion worth held abroad, have been frozen. This has limited the Central Bank’s ability to support the ruble, which has fallen to record lows against major currencies. On the other hand, Russia keeps all of its gold holdings at home.
The purchase price of gold is determined daily based on the morning price of the London Bullion Market Association (LBMA).
The Bank of Russia stopped gold purchases in April 2020 when prices soared due to the outbreak of the coronavirus pandemic. The head of the regulator, Elvira Nabiullina, explained the move due to high demand for the precious metal on world markets, which Russian exporters could take advantage of.
The price of gold jumped following the launch of the military operation in Ukraine last month, surging to $1,962 on February 24, up more than 6% for the month. Gold was trading at $2,000.30 per ounce at 09:00 GMT on Monday.
Russia had more than 2,000 tons of gold at the end of January, data from the International Monetary Fund shows. This accounts for just over 20% of the country’s reserves and makes Russia the fifth-biggest sovereign gold owner globally.
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