Russia's Finance Ministry to spend $4 billion on gold and currencies from Oct. 6 - Nov. 7

Thu Oct 05 2023

Russia's Finance Ministry will spend 398.72 billion rubles ($4 billion) on gold and foreign currencies between October 6 and November 7, with the daily volume to be equivalent to 18.12 billion rubles ($182 million), the Ministry announced on Wednesday.

On August 7, the Finance Ministry restarted the purchases for the first time since the Russian invasion of Ukraine in February 2022. The volume of purchases at the time was set at 1.8 billion rubles ($18 million) per day, and the overall volume was 40.5 billion rubles ($405 million) as of September 6. On September 7, daily purchases were increased to 12.6 billion rubles ($130 million), with the total volume of funds allocated set at 276.16 billion rubles ($2.7 billion) until October 5.

The Central Bank of Russia (CBR) announced that it will not be mirroring these moves in the market from August 10 until the end of 2023, saying that it made the decision in order to reduce volatility in the financial markets. The regulator said there could be deferred purchases in 2024 and in subsequent years, and it will decide on these operations once the CBR resumes mirroring regular purchases.

The Finance Ministry added that it expects oil and gas revenues to contribute an additional 513.48 billion rubles ($5.1 billion) to the federal budget in October. The Ministry said they received 114.76 billion rubles ($1.1 billion) less oil and gas revenue in September than expected.

The International Monetary Fund’s (IMF) latest International Financial Statistics (IFS) report showed that Russia’s central bank increased their gold reserves in August, and they have now returned to the level they were at the beginning of 2023.

“IMF IFS data shows #gold reserves at the Central Bank of Russia rose by 3 tonnes in August,” wrote Krishan Gopaul, senior analyst at the World Gold Council in a tweet. “This means that its gold reserves are back to where they were at the start of the year - 2,333 tonnes.”

While Russia is intent on increasing its gold reserves to help mitigate Western economic sanctions in response to the Ukraine conflict, the country has been forced to use its gold reserves to settle international transactions and to cover budget deficits.

In May, Russia's central bank sold four tonnes of gold and 2.59 billion yuan (USD$365 million) from the National Wealth Fund (NWF) accounts to raise additional money to finance their budget deficit after the Finance Ministry reported a 3.4 trillion-ruble ($42 billion) deficit in the first four months of the year, driven largely by lower energy revenues.

And in March, World Gold Council reported that the Russian central bank sold 3.1 tonnes of gold as the precious metal kicked off a major rally. At the same time, it also published missing data on its monthly gold holdings dating back to February 2022, which coincided with the start of the Ukraine war. The new data showed that Russia's gold reserves increased by 28 tonnes during that period.

Source: https://www.kitco.com/