The effect of the sanctions on Russia extended to its central bank, which lost access to a large portion of its foreign exchange reserves, as Western governments froze those assets in their joint efforts to pressure the country to stop the violent attacks on Ukraine. Effectively, at a critical time, the bank’s foreign currency reserves were rendered useless. This shifted the spotlight to gold, which the bank held in-country and, thanks to strong purchases in recent years, is estimated to represent just over 20% of its total reserves (approximately 2,300 tonnes; $140 billion).
Other central banks around the world were certainly watching, as gold, a lifeline, emerged uncontested as a safe store of value. To be clear, later in March, the U.S. did issue a notice prohibiting gold transactions with Russia. While this certainly complicates any sales, we doubt it will stop Russia from monetizing its gold if it so desires. The Bank of Russia later announced it will buy gold from Russian credit institutions.
MVIS Global Junior Gold Miners Index
Source: MV Index Solutions. All values are rebased to 1,000. Data as of 31 March 2022.
About the Author:
Ima Casanova joined VanEck in 2011. Prior to VanEck, Ima was Managing Director and Senior Equity Research Analyst at McNicoll Lewis & Vlak and established the firm's metals and mining research department. Previously, she was Equity Research Analyst at Barnard Jacobs Mellet USA and BMO Capital Markets and held positions as Production Technologist, Offshore Wellsite Supervisor and Petroleum Engineer for Shell Exploration and Production. Ima has both an MS and a BS (magna cum laude) in Mechanical Engineering from Case Western Reserve University.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.