EDITOR NOTE: Here’s de-dollarization in action. In 2018, nearly half of Russia’s central bank reserves were in US dollars. Today, dollars comprise only 22%, while gold (23%), the yuan (12%), and the Euro (nearly a third) make up the rest. Russia is now holding more gold in its reserves than dollars. The motivation behind this conversion is largely to soften the impact that US sanctions might have on the nation. In addition to this, however, another motivation shared by many investors across the globe and smart money in the US is to soften the blow that inflation might have on the value of US dollars, or to benefit from its demise.
A multi-year drive to reduce exposure to U.S. assets has pushed the share of gold in Russia’s $583 billion international reserves above dollars for the first time on record.
Gold made up 23% of the central bank’s stockpile as of the end of June 2020, the latest date for which data on the breakdown is available, according to a report published late Monday. The share of dollar assets dropped to 22%, down from more than 40% in 2018.
The shift is part of a broader strategy outlined by President Vladimir Putin to “de-dollarize” the Russian economy and lower its vulnerability to U.S. sanctions amid deteriorating relations with Washington. Gold is now the second-biggest component of the central bank’s reserves after the euro, which makes up about of a third of total assets. About 12% of the stash is in yuan.
The increase in Russia’s gold reserves was aided by a 26% surge in prices between June 2019 and June 2020. The central bank also bought $4.3 billion worth of the precious metal over the period, according to the report.
Originally posted on The Malaysian Reserve