Friday, October 23, 2009

Is Russia Really Selling Gold?

Doubtful. However there is a widely disseminated news report out of Moscow on Reuters that Russia plans on selling 46 tons of gold this year. While a couple people I know who are familiar with the way things work in Russia question the validity of this story, here is my take on it:

The Russian entity supposedly selling the gold is Gokhran, which is the State Precious Metals and Gem Repository and takes orders from the Finance Ministry.  The Russian Central Bank, which operates independently from Gokhran and takes orders from the Kremlin, has purchased around 67 tons of gold YTD, including 400,000 ounces, or roughly 12 tons last month.

But, who cares? IF  the Gokhran gold really is for sale, they have a neighbor directly to the south (China) who is overstuffed with dollars and who I'm sure will be interested in buying the entire lot. The question is, IF the suspected global shortage of physical bullion is bona fide, would Russia demand a large premium to spot for this chunk of gold? Perhaps Russia wrapped this offer in Christmas lights in order to create a bidding frenzy.  If they thought the sale of 45 tons of gold would hurt the price of gold, they would have kept the sale quiet.  If the sale happens, it will now be bid-in-comp and will likely be executed substantially above spot.

If the view that there is truly a physical shortage of gold and silver that has developed globally is bona fide, the sale of this chunk of Russian gold at premium to spot will confirm that view.   A long-time  London contact of GATA's Bill Murphy told Bill today that "physical gold is EXTREMELY hard to buy in SIZE. His sources are firms that have been in the gold business for 50 years. He believes it is going to get more difficult to secure supply in the weeks and months ahead."  This particular source of information, over the seven years I've been reading Murphy's nightly  Midas report, has uncannily accurate insight and intel on the gold and silver market.


  1. Dave,
    it makes no sense that Russia has been adding gold to their reserves for a while only to sell a bunch. I wonder if they float this story to try and get a gold price reduction to add more. Agree, we need proof.

  2. Beijing source confirmed that the dash for USD by offloading Gold is real. Apparently, Russia is running gigantic government deficits till 2012 and lots of Dollar Bond needed to be repaid (credit crunch in USD credit supply). Apparently, they still need to issue government bonds on top of the Gold sales.

    Moreover, Russia still has tons of gold in the mines, they can always just ramp up mining production like they did last year (21% up in production)in the future to recover their gold holdings.

    Last but not least, checkout the fast falling gold price.

  3. Get, I disagree. If Russia has been adding at a lower price, it makes perfect sense to sell at a profit. Gold near all time high.

  4. To sell gold for profit makes really perfect sense. And if they will going to sell, there is always China.