Tag Archives: CBR

Media Failure On Russia’s Official Gold Reserves

Last week I wrote how I can disagree with other media, be it mainstream or alternative, Chinese, Russian or English, on the reporting of the gold market. This week another perfect example came by, from Russian news outlet Sputnik International. According to this press agency the Russian Central Bank (CBR) currently holds 360 billion US dollars in official gold reserves and Elvira Nabiullina, head of the CBR, is determined to raise this amount to 500 billion US dollars. This is not true.

Sputnik wrote (click for link):

Russia to Increase Its Gold Reserves – Central Bank Head

The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion.

Russia will increase its gold reserves by up to $500 billion, said Elvira Nabiullina, the head of Russia’s Central Bank,…

…Currently, Russia owns $360.5 billion worth of gold reserves.

Let’s do some math:

Sputnik International states Russia currently owns 360 billion US dollars in gold. At a gold price of 1,200 USD an ounce this equals to

360,000,000,000/1,200 = 300,000,000 ounces

300,000,000/32151 = 9,331 metric tonnes

However, Russia currently does not own 9,331 tonnes in official gold reserves. Instead, it currently holds 1,247 tonnes – a difference of 8,084 tonnes – according to the website of the CBR and the IMF.

According to Sputnik the CBR will raise its official gold holdings from 360 billion USD to 500 billion USD. Or, converted to weight, from 9,331 tonnes to 12,960 tonnes. Suggesting the CBR is about to buy 3,629 tonnes in the coming years.

The misunderstanding can be easily cleared. Sputnik, for whatever reason, used Russia’s total International Reserves, which are currently 360 billion USD. If we head over to the (English) website of the CBR, we can see:

Screen Shot 2015-06-05 at 1.42.22 PM

International Reserves are the sum of Foreign Exchange (FX) Reserves and Gold. As of April 2015, Russia’s International Reserves stand at 356 billion USD, FX reserves are 308 billion USD and Gold is at 48 billion USD (1,247 tonnes). In Sputnik’s article total International Reserves have been mixed up with Gold Reserves.

The error can be confirmed by looking at the International Reserves level in 2012-2013, when it was about 500 billion USD. Sputnik wrote, “The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion”. If we look at Russia’s Gold Reserves in tonnes these were far lower in 2012-2013 than they are today (while the price of gold was much higher back then). It’s impossible Russia had more gold in reserve in 2012-2013 then today.

Russia's International Reserves

What Elvira Nabiullina actually said (June 4, 2015, St. Petersburg) we can read at Bloomberg:

Reserves should reach a “comfortable” level of about $500 billion within the next few years from about $357 billion now, Bank of Russia Governor Elvira Nabiullina told the International Banking Congress in St. Petersburg on Thursday.

This quote makes sense. Russia’s International Reserves are currently at 357 billion USD and Elvira Nabiullina is aiming to boost reserves to 500 billion USD (which Russia owned in 2012-2013, see last chart).

If we replace “Gold Reserves” in Sputnik’s article by “International Reserves”, all the numbers match up with the most recent data from the CBR and IMF. Case closed.

Sputnik’s article on a mirror server.

Russia Is Not Selling Gold, Bought 18t In November

There are rumors doing the rounds that Russia is selling gold. My first reaction to this news was that is contradictory to what Putin stands for. Russia has been the most openly aggressive buyer of gold in the past years and Putin never made it a secret he wants to move away from the US dollar as the world reserve currency – gold potentially playing a role in a new monetary order. The last thing Russia wants to do is sell the asset they have demonstrated to value the most. Besides, the Russian central bank (CBR) also has other FX reserves that it could sell to support the Ruble, if it wants to intervene.

The rumors about Russia selling gold were spread by Yahoo, Business Insider, and Zero Hedge/SocGen. Two other bloggers already did the debunking for us; Market Update wrote about Yahoo’s article and Bron Suchecki just published a must read on Zero Hedge/SocGen/Business Insider.

The final confirmation came from Vladimir himself. Yesterday the President of Russia gave his yearly press conference. When journalist Vyacheslav Terekhov (Interfax) asked about the crisis Russia currently is in, Putin made a clear statement:

VYACHESLAV TEREKHOV: There is something I would like to clarify, Mr President. Judging by the situation in the country, we are in the midst of a deep currency crisis, one that even Central Bank employees say they could not have foreseen in their worst nightmares.

Do you believe that things will get better in two years, as you mentioned, and we will recover from this financial and economic crisis? Criticism was piled on the Government and the Central Bank for the ruble’s Black Monday and Tuesday. Do you agree with this criticism?

VLADIMIR PUTIN: I said that given the most unfavourable foreign economic situation this could last (approximately, because no one can say for certain) for about two years. However, it may not last that long and the situation could take a turn for the better sooner. It could improve in the first or second quarter of next year, by the middle of next year, or by its end

…Overall, I think it is up to the Central Bank to decide whether to reduce the interest rate or not, they should see and react accordingly. They should not hand out our gold and foreign currency reserves or burn them on the market, but provide lending resources. 

UPDATE 1:59 PM CET. The CBR just disclosed it has purchased 18 tonnes of gold in November. The total Russian official gold reserves accounted for 1,188 tonnes on December 1, 2014.

Russian Official Gold Reserves

Golden Ruble Symbol Appears In Front Of Russian Bank

Silverdoctors published an article on April 9, 2014 titled: PUTIN SENDS THE WEST A GOLDEN MESSAGE: CENTRAL BANK OF RUSSIA CHANGES LOGO TO GOLDEN RUBLE. The article presents a “Google Translate” from the Russian website 1prime.ru and states the Russian central bank has changed it’s logo into a Golden Ruble. From Silverdoctors:

According to reports from Russian media, Putin appears to have sent the west a golden message in the aftermath of JPMorgan unilaterally deciding to block an official Russian wire transfer, as the Central Bank of Russia has introduced a new logo, which just happens to be a gold ruble.

Officials stated on the new logo: Golden Badge of the Russian national currency, officially adopted by the Central Bank of Russia, will symbolize a sign of stability and security of the ruble gold reserves of the country.

The article suggests this to be the new logo:

Russia gold bar

The first thing I noticed was that in the original Russian article I couldn’t find the new golden Ruble logo displayed by Silverdoctors. In order to get closer to the bottom of this I decided to ask a Russian friend of mine, who has no expertise in politics or economics, to translate the original Russian article:

Golden Ruble symbol appears in front of the central bank of Russia

Moscow, march 30- RIA News. A symbol of the Russian ruble appears on sunday in front of the office of a Russian joint-stock bank, organizers said.

The action took place at 15.00 in front of the bank Perevedenovskom lain in the center of Moscow (near metro “Baumanskaya”).

A golden badge of the Russian national currency officially adopted by the CBR will symbolize a sign of stability and security of the ruble gold reserves of the country – said the organizers.

Thus participants installation intends to express support to the Russian bank, who decided to work exclusively for the domestic market and only with one currency, the national currency of the Russian Federation, the Russian ruble.

US authorities in response to accession of the Crimea to the Russian Federation imposed sanctions on 20 Russians and Russian banks, including the thirty largest in the country. Consequence of the sanctions was the refusal of the international payment system Visa and Master Card to conduct non-cash transactions through Russian cards, worsening outlook on the banks and suspension of rating actions. On friday, the Bank announced that it will only work in Russia, and only with rubles.

The symbol of the Russian ruble, the letter R with a horizontal line, was approved by the Central Bank sovdirom in december 2013.

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Im fully aware that “my” translation is far from perfect, though we must conclude the message the original article contains is different from that of Silverdoctors. What actually happened was that activists supporting their banks in the fight against US sanctions, build a golden colored Ruble symbol out of wood and revealed it in front of a commercial bank, as we can see in the picture below. And no, I don’t think Putin funded this action. Here is more information.

Golden Russian Ruble

In Gold We Trust