Russia’s policy to ditch the dollar from its reserves as well as its trade with other countries has resulted in the rapid growth of its gold holdings over the last year – an example that has been followed by China and other states.
Russia has earned a whopping $20 billion largely due to Washington’s trade stand-off with China, Wolfram Weimer, a columnist for Germany’s Web.de website, has indicated.
It is no secret that Russia has been actively buying gold, becoming the biggest buyer in 2018, acquiring 274.3 tonnes, and continuing the trend in 2019. Weimer indicated that since Moscow adopted the new strategy, which is intended to reduce the influence of the dollar on the Russian economy, the precious metal’s price has spiked by 20%. Indeed, in the past three months alone, gold’s price has jumped from $1,264 per ounce (around 28 grams) to around $1,500 per ounce.
The columnist argues that the US-China trade war has largely contributed to this rise, as investors use gold as a safe haven during times of crisis and uncertainty. Additionally, in his opinion, the Russian Central Bank’s purchasing the majority of the gold produced domestically has created a certain supply shortage on global markets, further fuelling the metal’s price rise.
Russia began to abandon its dollar-denominated assets around March-April 2018, selling over 90% of its US Treasury bonds and directing its resources towards gold acquisition, with the total reserve reportedly now exceeding 2,000 tonnes. The World Gold Council has named Russia 2018’s biggest gold buyer and the trend has continued in 2019. In June alone, the Russian Central bank bought 18.66 tonnes of the precious metal.
Russian President Vladimir Putin has repeatedly spoken in favour of ditching the dollar in trade, arguing that Washington is abusing the dominant position of its currency in order to exercise pressure on sovereign states.
The de-dollarisation trend has been followed by China, which recently became the second biggest buyer of gold, Turkey, Poland, Hungary, and Kazakhstan. In addition, several countries, specifically the members of BRICS, have opted to reduce the use of the dollar in mutual trade, replacing the greenback with national currencies.