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Metallix Refining - Russia’s developing a taste for gold
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Russia’s developing a taste for gold

Posted by: on October 4, 2016

Russia's Central Bank has acquired a taste for gold in recent years. According to a Sputnik News report, the country bought 208 tons of the yellow precious metal last year and plans to buy another 200 tons in 2016. Not only is Russia the third leading producer of gold in the world, but now they are buying it in droves. In fact, gold accounts for more than 16 percent of Russia's foreign exchange reserves. Why? Because of its value.

The nation has not consciously decided to grow its gold reserves, but it is buying the yellow precious metal because of its profitability. Given the value of its currency against those around the world, Russia is able to purchase more gold than other countries.

Gold buying a decade-long trend for Russia
The nation's gold reserves are now up to 49.1 million ounces, or 1,527.2 tons, which is worth approximately $64.71 billion. This continues a popular trend with the nation as it has now increased its gold reserves from 402 tons in 2007 to 883 tons in 2012. Furthermore, Russia's reserves will most likely be more than 1,600 tons by the end of the year. 

Russia's becoming a gold producer
Gold has been one of the hottest commodities this year as its prices have risen over 20 percent since Jan. 1. This is especially positive for the value of Russia's gold prices because of its attractiveness to the central banks of other countries, most notably China.

In fact, the nation has jumped up its gold production this year. Australia currently ranks as the second largest gold producer in the world, but Russia may actually bypass them by 2030. The country could produce 400 tons of the yellow precious metal in the near future, up from 247 tons in 2014.

Aside for its status as a producer, part of the reason why the nation wants gold is that it wants to diversify its investments.

Russia becoming less dependent on U.S. debt
The country has several uses for gold, including jewelry and electronics among other industrial applications. However, it has become a substantial investment for the Russian Central Bank because it is currently generating returns, whereas U.S. Treasury bonds are yielding historic lows.

The Russian gold buying effort is also part of a larger effort to wean away from buying up U.S. debt. This is due to the fact that the U.S.'s ability to increase political pressure on the Russian government. 

The bottom line is that Russia's status in the gold game could push the metal's value up. With the outlook of gold prices still looking positive for the next two to three years, Russia may very well become one of the world's power players that determine how far north its value goes in the near future.