Five months before this significant purchase, the Central Bank used 6.2 tons of precious metal for minting an expanded assortment of the investment coin "St. George the Victorious" (including new coins of smaller and larger weights).
Consequently, in July of this year, the Central Bank of the Russian Federation returned exactly half of the amount of gold that had been consumed. Is the sudden purchase caused only by the need to recover the "lost" part of the reserves, or does this decision indicate a change in the Central Bank's policy?
As you know, in 2018-2019, Russia was the largest buyer of gold in the world with 274 and 158 tons, respectively. After imposing a moratorium on the purchase of precious metals by the Central Bank, Russian mining enterprises received the right to export their products, some of which were previously acquired by the main financial regulator. For this reason, last year the volume of gold sales abroad amounted to 320 tons worth $ 18.5 billion (a record in the entire post-Soviet history!).
However, if the Central Bank of the Russian Federation really resumed the growth of reserves, it means that it is quite possible that the export of precious metals may be stopped or limited. Let us cite the following fact in favor of such a scenario. In June, Anton Siluanov, Minister of Finance of the Russian Federation, announced that the National Wealth Fund (NWF) has the right to invest 20% of its capital in gold. After such June news, the acquisition of precious metals in July does not seem to be such an accident, but only a renewal of the 2018-2019 trend.
However, the Central banks of other countries have also become more willing to purchase precious metals this year. The world gold reserve grew by 333 tons in 6 months, which is 63% higher on an annualized basis. The largest buyers were Thailand (90.2 tons), Hungary (63 tons), Brazil (53.7 tons). In developing countries, it is well known that gold provides financial stability in the face of geo-economic instability caused by the pandemic, as well as a sharp rise in inflation. Moreover, the precious metal rate is holding about $ 1,800 per ounce, having dropped significantly after reaching a record figure in August 2020 - $ 2,060 per ounce.
The current levels seem to be comfortable for entering the market, and on this basis it can be argued that there is nothing surprising in the purchase of gold by the Central Bank of Russia.