Russia Holds More Gold Than Dollars for First Time in History
With the US taking advantage of its privilege as the issuer of the world reserve currency to push its foreign policy agenda across the globe, Russia and other countries have made a concerted effort to minimize exposure to the dollar.
For the first time ever, Russia holds more gold than US dollars.
According to a Central Bank of Russia report published this week and analyzed by Bloomberg, gold made up 23% of the Central Bank of Russia’s reserves as of the end of June.
The bank’s share of dollar assets dropped to 22%. In 2018, more than 40% of Russian reserves were in dollars.
This was partly due to an increase in the value of its gold holdings with the rise in gold prices, and partly a function of the central bank’s continued efforts to shed dollar assets.
Russia’s shrinking dollar reserves was no accident. It was an intentional “de-dollarization” policy outlined by President Putin to lower the country’s exposure to the United States and shield it from the threat of US sanctions.
The Central Bank of Russia has also increased its holdings of yuan. The Chinese currency now makes up about 12% of Russian reserves.
Before ending its purchase program last spring, Russia was the biggest central bank buyer of gold. The Central Bank of Russia bought $4.3 billion worth of the yellow metal between June 2019 and June 2020, according to the report.
According to Bloomberg, “Russia spent more than $40 billion building a war chest of gold over the past five years, making it the world’s biggest buyer.”
We’ve been watching this de-dollarization trend over the last several years, and have written extensively about the push to minimize dollar exposure by countries like Russia and China and their desire to undermine the ability of the US to weaponize the dollar as a foreign policy tool.
Taken in isolation, Russia’s aggressive de-dollarization isn’t significant. But if the trend continues in other countries, it could eventually threaten the dollar’s role as the reserve currency.
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