Year in and year out, there are generally two main competitors for the title "world's biggest gold consumer." The head-to-head battle is annually between the Chinese government and the public of India. The Indian people's insatiable gold demand causes between 800 and 1,000 metric tonnes of the metal to be imported into the country each year. This is far above what any one organization or central bank adds to its holdings in one year, but this gold is dispersed among hundreds of millions of people and is often in the form of jewelry.
By contrast, the People's Bank of China consolidates its gold stockpile as reserve deposits like most other central banks around the world. With this in mind, China's government probably deserves the title. However, another horse has entered the race for the largest global gold buyer: the Russian central bank.
Russian Central Bank Hoarding Gold
To say that times have been tough for Russia, economically speaking, is an understatement. The country didn't only suffer heavily under the past several years' commodities crash due to its reliance upon exporting natural resources. In addition, it was hurt by sanctions from Western nations due to its military adventurism in several former Soviet satellite states. On top of it all, the crash in crude oil prices sent the ruble tumbling, causing the Russian public to panic.
Naturally, the country's central bank sought to stabilize its financial situation by bolstering its gold reserves. The bank already held a sizeable amount of gold bullion, placing the Russian central bank 7th in the world in gold holdings (even when organizations like the IMF are included). Strangely enough, one significant gold producer, Canada, has actually gone the opposite direction: the country officially holds zero gold reserves!
The chart below lists the 10 largest institutional holders of gold in the world coming into this year.
According to the most recent data from the International Monetary Fund (IMF) itself, Russia outpaced China in official government gold purchases during February, adding 356,000 troy ounces (over 11 tonnes) compared to 320,000 oz from the former. Additionally, 2015 marked the fourth straight year that the Russian central bank was the largest buyer of gold among its peers. Over the course of 2016, the Russian central bank has already seen the value of its gold reserves increase by $19 billion due to new additions and rising bullion prices.
The central bank saw $5.8 billion in gold inflows last week alone, bringing the gross monetary value (GMV) of its total gold holdings to $387 billion. The government says it has a target of growing that stockpile to half a trillion dollars over the next 5 years.
While the headlines are all about Russia—at least for the moment—exceeding China's official gold purchases, it's not as if the regime of Vladimir Putin is coming late to the scene. Over the past decade, the country has progressively been stacking up more and more gold reserves. This was more than a move to protect the Russian financial system from deep recession and international sanctions. It also took advantage of bottom-barrel prices for gold.
The story of the Russian central bank hoarding gold is just another example of the constant flow of the precious metal out of Western vaults and into the hands of wise folks in the Eastern Hemisphere.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.