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Putin's Payoff? Gold Surges Amid Stock Market Mayhem

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Gold prices and holdings have surged in January, amid increased volatility in markets and new geopolitical risks. Could the new rise in prices save Russia's finances, long rumored to be increasingly gold-based?

Gold prices have surged since the beginning of 2016, amid oil price and financial market volatility, as holdings of the metal by investors more than reversed losses in December.

Gold holdings, as well as prices grew by record amounts, according to data compiled by Bloomberg, as stocks and commodities first crashed and then surged in January, amid increasing instability in China's economy and the Middle East's geopolitics. Russia's own holdings in the metal have remained constant in dollar terms while growing greatly in volume, creating speculation in the financial press about Russia's true intentions.

"People have become complacent about risks, whether it’s macroeconomic and geopolitical. What’s out of fashion may be coming back," George Milling-Stanley, head of gold investments at Boston based State Street Global Advisors, told Bloomberg.

Gold holdings fell amid previous shocks of 2015, such as the Paris terror attacks in anticipation of a rate increase by the US Federal Reserve. With the new Fed policy apparent and new risks and tensions becoming increasingly unpredictable, banks such as Citigroup to increase its gold price forecast by 10 percent.

Could Gold Actually Save Russia?

Russia's Central Bank spent $7.53 billion on gold over the course of 2015, compared to $6.69 billion the previous year. The number amounts to a quarter of the entire world's officially purchased gold in the first half of 2015, according to the World Gold Council. In terms of tonnage, Russia's gold purchases grew by 20 percent when comparing the first halves of 2014 and 2015.

The Russian Central Bank's moves to buy gold have attracted attention in both fringe and mainstream financial media as everything from a sanctions-proof safeguard to a way to wage "economic war" (thank the Telegraph for that one).

The strangest part of the "Russian gold" conspiracy theories, however, was their attribution of the gold-buying to Russian President Vladimir Putin, who does not control the Central Bank's monetary policy.

In Russia itself, somewhat humorously, the gold-related conspiracy theories never gained ground because Russia's own leading conspiracy theories attribute the Central Bank's independence to control by the IMF and a "One World Government."

Financial observers inside Russia have noted that the increased gold purchasing may have been in part due to lobbying of the Central Bank by Russian gold manufacturers.

Overall, the Central Bank's policy appears to have been to keep its gold holdings buoyed at around $50 billion as the price falls. However, despite being a guarantor for the Central Bank, a rise in the price of gold, even to its 2011 peak, would mean a gain of roughly $37 billion for the Russian reserves, or 10.2 percent total, not enough to even cover Russia's $38.6 billion budget deficit set for 2016.

The amount is hardly enough to prop up the Russian ruble at its highs before the oil price crash, when Russian reserves hovered at over $500 billion, compared to $368 billion today, according to the Central Bank's statistics.

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Tags:
gold, stock market, Russian Central Bank, Vladimir Putin, Russia
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  • emusua
    gold and silver.
  • cast235
    That's to show that PUTIN have BETTER leadership that OBAMA, KERRY, Mc Cain, BIDEN, Poroschenko, Cameron. Hollande, Merkel, the list goes on.
    About Obama? KKK and neo Nazi's may support a march declaring PUTIN'S leadership superior. "A SUPERIOR MAN".. They will say.. I know.. Putin is NOT that way. Nice to have some humor at times.
  • Putin knows how to be a winner when everyone thinks he will lose.
  • sovietico
    The Gold. And the Platinum, the Diamonds, the Silver, Uranium, and so on?
    The Russian Federation, incredible Nation! Go ahead in this Way for All Peoples of The World!
  • Shue
    You gotta hand it to the Russian Leadership. They've weathered everything the West could throw at them and they've only gotten stronger and more resilient.
  • Marc Nonnenkamp
    Any corrections aside, precious metals should be on a long term uptick.
  • anne00marie
    I find it interesting that Dr Putin has a PhD in economics. No big deal, apart from the fact Russia was bankrupt when he first came to power in 2000.

    Move forward, he sorted out the oligarchs, paid off the $45 billion soviet Union debt, $16.5 billion Russian Federation debt, rise in the middle class sector, the Russians life expectancy has increased by an average 5 years. The currency reserves are around $370,000,000,000, low tax, almost enough gold to back the ruble and of course control of their natural resources.

    Guess he choice a good subject for his PhD?
  • MsLiberty
    I recommend to the author of this piece the following:

    rub the sleep out of your eyes, go get a cup of coffee, collect your notes and your thoughts and start over. I kind of get the jist but the way it's written doesn't make sense. Leave out the part about conspiracy theories because they are not news and add nothing to the importance of what needs to be said. Don't opine on what it appears to be, rather, you might want to ring the bank and just ask them about how their take on the global economic developments makes stocking up on gold good sense and a prudent direction the bank should take. What do you know? They might even give you a scoop if you're courteous.
  • aggttc
    Gold beat paper many time over especially with the US Govt printing fiat paper like no tomorrow. Before Obama was the President, the US total debt was USD10T and today it is about USD19T. US is worth the paper and the ink printed on it and being the Global reserve currency, it is her main export to the rest of the World and print unlimited amount. So better to have physical than paper.
  • Blackiein reply toanne00marie(Show commentHide comment)
    anne00marie,
    Frau Merkel has a Doctrate and even is a Professor. I heard she asked for the German gold back (then suddenly had a leg accident) but only got 5 tons back.
    I thought there was over 300 tons held in America.
  • Blackiein reply toaggttc(Show commentHide comment)
  • jas
    In Russia itself, somewhat humorously, the gold-related conspiracy theories never gained ground because Russia's own leading conspiracy theories attribute the Central Bank's independence to control by the IMF and a "One World Government."
    --
    It's interesting how corruption is laughed off in this article as a "conspiracy theory". "Tee hee, 'one world government'. How silly. Tee hee" Explain NATO and economic sanctions of the West and explain the EU and US acting together to freeze out governments they don't like. PACE, SWIFT, Wall Street, IMF, World Bank, UN, G7, WTO, OSCE, NATO and now TTIP. Yeah, one world government is such a joke. *sarcasm*
  • jasin reply tojas(Show commentHide comment)
    jas, conspiracy to overthrow Middle East governments and redraw borders. Such a joke. www.youtube.com/watch?v=r8YtF76s-yM Wesley Clark revealing about ME invasions planned.

    US plan to redraw Middle East
    www.globalresearch.ca/plans-for-redrawing-the-middle-east-the-project-for-a-new-middle-east/3882
    Wolfowitz Doctrine
    freedom-articles.toolsforfreedom.com/wolfowitz-doctrine-us-plan-global-supremacy

    One government and global domination is a documented threat and fact, not some wild theory.
  • Baybars in reply toMsLiberty(Show commentHide comment)
    MsLiberty, Well said. Fear tactics on the authors part, perhaps?
  • MsLibertyin reply toBaybars (Show commentHide comment)
    Baybars,
    I don't know, but don't think so. It strikes me as such low level information that it resembles a puff piece, but since it alludes to some HUGE stuff happening in the background, it can't really call it that. And so sorry that I won't specify; I'd like to, but here's not the place for that. Spidey-sense tells me, the Russian central bank might be at that point where disclosure is timely but they can't do it themselves - someone else has to take the initiative to ask the right questions, like the author, for instance. The war has been going on for a few years, but only just getting started and it's beyond the bullets and bombs scenario- and scorched earth in more ways than one. It's for all the marbles so - Pray for peace. Intentions in this regard are of the essence.
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