Gold By Country:
2013 Demand: 73.3 tonnes
Jewelry/Coin & Bar Demand: 73.3 tonnes/0 tonnes
Reserves: 1,035.2 tonnes
% of Total Forex Reserves: 9.52%
2013 GDP: $2.55 trillion
The news coming out of Russia the last few months has been centered on its aggressive annexation of the Crimean Peninsula, and its hostilities toward Ukraine. These hostile actions have given way to harsh economic sanctions put in place by the United States and its European allies. In this light, it would appear as though Russia is getting ready for a prolonged economic standoff with the United States. Russian President Vladimir Putin has gone on record numerous times, openly criticizing the Western powers, and making clear his disdain for the dollar and its role as the world's reserve currency. This has stoked fears among gold investors and traders, that a new surge in demand for physical gold, due to the Russian conflict, will trigger a spike in gold spot prices akin to what occurred in the the latter half of the previous decade. However, many believe the opposite is possible as well—that a future sell-off of Russian gold reserves could potentially cause a flooding of the market, triggering a sharp drop in the price of gold. Certainly, Russia's move to consolidate its foreign reserves from abroad have added to these beliefs.
Russia is home to one of the world's largest provable and probable deposits of gold ore, with an estimated 83 million troy ounces. In 2013, Russia had the fourth highest domestic production of gold worldwide, with just over 220 metric tonnes. Despite only realizing a commercial demand of approximately 73.3 tonnes, the Russian Federation does not export any of the gold mined within their borders. It is estimated that they now carry reserves in excess of 1,035 metric tonnes (and counting). Many believe this is a deliberate stockpiling of gold in preparation for a possible sell-off, should economic sanctions start to prove overly burdensome.
Polyus Gold is the largest commercial gold mining enterprise operating within the Russian Federation. They currently operate facilities in Siberia and the Far East, and lay claim to the 3rd largest gold deposit in the word, with more than 83 million provable troy ounces.
Russian demand for gold is comprised solely by the consumption of jewelry, with no consumption demand for coins or bars. There are three factors that contribute to this phenomenon. Under communism, the flow of all precious metals was tightly controlled by the central government. The collection of coins, made from silver and gold, was banned under threat of imprisonment. In fact, during the Soviet Era, an underground numismatic association existed, despite many of its members being imprisoned for their collections. Second, the postal service in Russia is riddled with inefficiency and corruption. Packages take many weeks to reach their destination, and often have their contents stolen. Third, in 2009, the Russian Central Bank manufactured and marketed a faulty gold bullion coin that was purported to be .999 fine. However, these coins quickly started developing intense “rust spots.” When it was discovered that these coins had a serious defect, the Russian Central bank offered to buy them back, but at less than 90% of the stated value. The combination of these three factors was enough to all but eradicate demand for gold coins and bars within Russia.
Did You Know?
During the early 19th century, Russian jewelers began to experiment with different colored gold by manipulating the composition of the alloy. One of the most popular byproducts of this process was distinctive “red gold,” or “rose gold,” which is produced from an alloy of gold and copper. Depending on the proportion of copper, Red gold—sometimes simply referred to as “Russian gold”—will be darker or lighter, though a mixture of 50% gold and 50% copper is fairly common. Even today, it remains a fashionable form of jewelry in Russia. Russia also had a brief period of minting commemorative coinage, such as the 1996 Russian 200 rouble gold coin. These coins depicted the wildlife of Russia such as the Amur Tiger, a native Russian large cat.