Central Bank of Russia: expect increased demand for gold and other alternative currencies to the US dollar, euro
(Kitco News) Central banks, especially those in Asia and the Middle East, will rethink their foreign exchange reserve strategies for the US dollar and euro due to the West’s recent use of financial sanctions. , according to the Central Bank of Russia.
A list of financial restrictions was imposed on Russia after its February 24 invasion of Ukraine, including limits on Russian central bank reserves, freezing about half of the $642 billion in reserves of Russia.
Russia expects other central banks, especially those in Asia and the Middle East, to buy more gold and opt for currencies such as the Chinese yuan against the US dollar and the euro .
“One would expect an increase in demand for gold and a decrease in the role of the US dollar and the euro as reserve assets,” the Russian central bank said in a stability report. financial. “According to the World Gold Council, global demand for gold in the first quarter of 2022 increased by 34% on an annual basis. Against the backdrop of these global changes, periods of increased volatility in global markets are possible, which will contribute to rising interest rates.
The move into assets like gold is entirely due to Western sanctions on Russia and talk of seizing frozen parts of Russian reserves, Russia’s central bank said.
“One of the results of the restrictions imposed by the sanctions on the foreign exchange market has been the tendency to increase the use of alternative currencies to the US dollar and the euro,” the central bank said, pointing to the Chinese yuan.
The Russian central bank added that it might even consider introducing negative interest rates on bank deposits in dollars and euros.
Last April, Russia’s central bank announced that it had further reduced its holdings of US dollars earlier this year, adding that it had enough yuan and gold despite the impact of Western sanctions.
According to the data, the central bank cut its share of US dollars in reserves to 10.9% as of January 1, 2022. This is down from 21.2% reported a year earlier. In the meantime, holdings of yuan increased from 12.8% to 17.1%, and holdings of euros increased from 29.2% to 33.9%.
The share of gold in reserves fell slightly from 23.3% to 21.5%. According to the latest IMF data, Russia held nearly 2,300 tonnes of gold at the end of January – the fifth largest owner of sovereign gold.
Russia’s reserves currently stand at around $583.4 billion.
Russia’s central bank has a clear goal: to move further away from the US dollar to read the euro.
“The role of the US dollar and the euro in the Russian market will begin to decline, while the importance of the currencies of friendly countries will increase, as well as the role of the ruble in the settlements of foreign trade operations,” said the bank. Tuesday.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.