A report from American nonprofit RAND suggests Russia is using gold to purchase hard currency, weapons and foreign goods that help to support its ongoing invasion of Ukraine.
Meanwhile, China is planning to expand its futures market bu adding varieties of derivatives “in which qualified foreign institutional investors can participate within commodity futures and options trading,” according to a report from Business Today.
Forced into gold
Russia was forced to find alternatives to the U.S. dollar to continue its war effort, and quickly turned to gold amid sanctions from the West.
“Since 2022, gold prices have surged 40% even as U.S. interest rates were climbing,” said Lina Thomas, commodities strategist with Goldman Sachs Research.
“That was a wake-up call for central banks world wide,” she said. “They began to diversify their reserves away from the dollar and into an asset no one can freeze — and that is gold.”
Sourcing gold by Russia
Russia is one of the largest producers of gold, with about 320 tonnes mined annually, which equates to about 10% of world production.
Polyus, one of the largest operations, has an operating profit of $1.58 billion through the first half of 2024, according to the Kyiv Post.
“These companies mostly sell their gold to Russian commercial banks, such as VTB Bank, MDM, Sberbank, and Gazprombank, the financial arm of the majority state-owned energy company, Gazprom,” the report from the Post detailed.
That gold is then sold to the Russian central bank, which has shown little slowing in gobbling up the production of its own country.
“By the time of Russia’s full-scale invasion of Ukraine in February 2022, it had been acquiring gold at a fast rate than any other country for a decade,” said John Kennedy of RAND. “Moscow is using gold to prop up its wartime economy and bolster access to crucial goods, while holding considerable influence over the production of gold in Central Asia and Africa.”
China’s involvement in gold movement
China’s promise to increase the reach of its commodities market is likely no coincidence to Russia’s increased appetite for metals.
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