Tags: gold | russia | sell | bullion

Gold Traders Bet Russia's Next Move Will Be to Sell Bullion

Wednesday, 17 Dec 2014 08:10 AM

Russia’s surprise interest-rate increase failed to stop the plummeting ruble. Another tool available to repair economic havoc caused by sanctions and falling oil prices: selling gold.

Russia holds about 1,169.5 metric tons of the precious metal, the central bank said last month. That’s about 10 percent of its foreign reserves, according to the London-based World Gold Council. The country added 150 tons this year through Nov. 18, central bank Governor Elvira Nabiullina told lawmakers. 

Russia’s cash pile has dropped to a five-year low as its central bank spent more than $80 billion trying to slow the ruble’s retreat. The currency’s collapse combined with more than a 40 percent tumble in oil prices this year is robbing Russia of the hard currency it needs in the face of sanctions imposed after President Vladimir Putin’s annexation of Crimea. A fall in gold prices signals that traders are betting that the country will tap its reserves.

“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves,” Kevin Mahn, who oversees $150 million at Parsippany, New Jersey-based Hennion & Walsh Asset Management. “If it happens it will push gold lower.”

Gold for February delivery rose 0.3 percent to $1,198 an ounce on the Comex in New York at 9:03 a.m. London time. Futures are 0.4 percent lower this year after slumping 28 percent in 2013.

Adding Gold

Russia has tripled its gold reserves since 2005, according to Bloomberg calculations. Its holdings compare with about 70 percent for the U.S. and Germany, the biggest bullion holders, the World Gold Council data show.

“Russia has been adding to their gold through the turmoil and it’s their reserve asset so they would utilize it ultimately,” Michael Widmer, metals strategist at Bank of America Corp. in London, said in a phone interview. Russia could use the gold to raise cash or use it as collateral, he said.

Gold prices fell 8.4 percent last quarter amid concern that the Federal Reserve would raise rates as the U.S. economy showed signs of improvement. The Fed will review the time frame for action on borrowing costs at the two-day Federal Open Market Committee meeting that ends Wednesday.

Russia’s central bank buys gold from the domestic market and from the nation’s bullion banks, the World Gold Council said.

“Gold may come under further pressure because of Russia,” James Cordier, founder of Optionsellers.com in Tampa, Florida, said in phone interview. “Oil prices are not on their side, so now the next option they have for raising cash is selling gold. There is some talk that the country has either started selling or is making arrangements to sell their gold.”

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Russia's surprise interest-rate increase failed to stop the plummeting ruble. Another tool available to repair economic havoc caused by sanctions and falling oil prices: selling gold. Russia holds about 1,169.5 metric tons of the precious metal, the central bank said last...
gold, russia, sell, bullion
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2014-10-17
Wednesday, 17 Dec 2014 08:10 AM
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