Currency News: Russia Turns to Gold to Replenish Currency Reserves
Currency News
In January 2016, Russia officially became the world’s leading purchaser of gold with the IMF saying that the Bank of Russia had acquired 688,000 ounces of gold. Russia now has gold and currency reserves over $380 billion for the first time since January 2015 with gold making up 15% of reserves as of March 1st of this year.
At the end of 2014, the ruble suffered its largest crash in 16 years, falling 11% in just one day in December. The Russian economy is built around oil commodities, so when oil prices dropped sharply they brought the nation’s economy of foreign money with them. Attempts by the government to amend the situation with increased interest rates were not successful and the economy continued to suffer.
In another attempt to stop or, at least, slow the collapse of the ruble, the Russian government sold tens of billions of dollars in foreign exchange holdings. This depleted the country’s gold and currency reserves to approximately $356 billion by the end of April 2015.
Policy makers have been acting to replenish the nation’s reserves by purchasing gold at low prices and with immense volume for the last 13 months. Even with oil prices continuing to fall, gold prices have rebounded and are now helping to replenish reserves. The ruble has seen a growth of 9% this year against the dollar, but economics expect the government to wait for the Ruble to gain 12% on the dollar before resuming foreign currency acquisition.
Other economists see this exaggerated purchasing of gold as part of a plan to weaken the dollar and to undermine the power of the United States and Europe. Some publications accuse the Russian government of trying to weaken the dependence on the dollar currency as an insurance policy against further tightening sanctions on the country by the US.
