The German government has recently been rather skeptical about Russia’s decision to ramp up its gold reserves. However, given the recent surge in the price of gold, Germany has revised its attitude towards gold and Russia's gold strategy.
Remarkably, Germany was taken aback by a sharp rise in the price of gold on world exchanges. In mid-August, gold was worth more than $2,000 per troy ounce. German analysts admitted that the replenishment of gold reserves was the right move amid the possible second wave of the coronavirus pandemic and the looming global economic crisis.
Holger Zschepitz, an editor at Die Welt, noticed that Russia's decision to build up its strategic national gold reserves turned out to be extremely profitable and successful. Earlier, in 2019, Zschepitz believed that Russia would be caught in the trap of gold reserves. However, in an interview with the German media company Deutsche Welle, he admitted that he was wrong, and the Russian president made a good decision.
Many central banks had to revise their portfolio in favor of gold after this precious metal developed a dazzling rally across the board. After its price jumped above $2,000 per troy ounce, the Russian central bank already shored up reserves of the precious metal. "Putin wanted to reduce the dependence of Russian reserves on the US dollar, and with the help of gold, he masterfully coped with this geopolitical task. In this area he acts intelligently and successfully," Holger Zschepitz pointed out.
The wave of positiveness towards Russia was picked up by other leading analysts. German publicist and publisher Wolfram Weimer called Vladimir Putin "man of the week" for his gold and foreign exchange policy. He also noted the importance of buying up gold in an attempt to lower dependence on the US dollar.
A few years ago, Western Europe and the United States were rather scornful about the gold-oriented policy of Russia and China. At that time, gold was an outsider of the market, and its price remained low for a long time. However, now it is hitting one record high after another. Therefore, countries with big gold reserves are now in a win-win position.
Some economists assume that demand for gold is buoyant as many countries are attempting to find an alternative for the greenback. Gold seems the most suitable candidate for this role. Over the past 15 years, a lot of countries, except Europe and the United States, have gradually moved away from the dominant reserve currency, increasing their gold reserves. Besides, nowadays, more and more economists stress the importance of the so-called basket of currencies
The SDR (Special Drawing Right) is an artificial basket currency that is used by the International Monetary Fund for internal accounting purposes. If it takes shape, it may be linked to SDR (Special Drawing Rights). The owners of this asset are allowed to control a part of the funds deposited in the Fund. To do this, states need to keep all currencies and gold in their portfolios.
In July 2020, gold reserves in the Central Bank of Russia's vault rose by 10% to $13.5 billion. By the end of August, this figure reached $144.3 billion. According to analysts, in times of crisis, gold comes to the fore, so over the next two years, Russia is likely to continue multiplying its gold reserves.
