The Bank of Russia continued to reduce its gold holdings and reduced its holdings by 1.6 million ounces during the year, and its reserves fell to their lowest level in more than six years
The Zhitong Finance App learned that the Bank of Russia is continuing to reduce its gold reserves. By the end of July, Russia's official gold holdings had fallen to their lowest level in more than six years, indicating that at a time when fiscal revenue is under pressure, the Russian government continues to use gold and foreign exchange assets to help bridge the budget gap.
According to data released by the Bank of Russia on Thursday, as of August 1, the bank's gold reserves were 73.2 million ounces, a decrease of 1.6 million ounces from the beginning of this year, to the lowest level since January 2020. Meanwhile, in the first seven months of this year, the value of the Bank of Russia's gold reserves decreased by a total of 33.7 billion US dollars.
In the past, the Bank of Russia was one of the world's largest buyers of sovereign gold, and has been buying large amounts of gold produced in Russia for a long time. However, the bank suspended large-scale gold purchases in early 2020.
After the Russia-Ukraine conflict broke out in 2022, Western countries imposed a series of sanctions on Russia, limiting Russian gold exports. At the time, the Bank of Russia promised to resume gold purchases to a certain extent to help absorb the difficult domestic supply of gold, but since then it has not actually resumed its previous large-scale procurement model.
In recent years, the Bank of Russia's gold policy has undergone further changes. Beginning last year, as the Russian Ministry of Finance sold gold and foreign exchange assets held by the National Wealth Fund, the Bank of Russia also began to reduce its own gold reserves accordingly.
This operation is mainly related to rising fiscal pressure on Russia. Weakening energy revenues have led to a widening government budget gap. As a result, the Russian Ministry of Finance needs to sell gold and foreign exchange assets in national wealth funds to obtain funds to cover the fiscal deficit.
According to the so-called “mirroring mechanism” implemented by Russia, when the Ministry of Finance sells gold and foreign exchange assets in national wealth funds, the Bank of Russia will carry out corresponding operations in the domestic market to offset the impact of government transactions on the ruble exchange rate and the liquidity of the domestic financial system.
This means that the Bank of Russia's recent decline in gold reserves is not simply based on judging gold price trends; it is more related to government financial operations and mechanisms to stabilize the domestic financial market.
Looking at the longer term, Russia's continued decline in gold reserves indicates that its official gold holdings have clearly deviated from the trend of continuing to increase their holdings in the past. Against the backdrop that Russia has been the world's major central bank gold buyer for a long time, its gold reserves have fallen to their lowest level since 2020, which is also an important sign of current fiscal pressure and changes in asset allocation.