September 16, 2019 BARRON’S M9

Commodities Corner

Russia, China Pile Into Gold

By Myra P. Saefong

EMERGING MARKETS HAVE BEEFED UP GOLD HOLDINGS, UNDETERRED BY PRICES

near their highest levels in more than six years, as countries such as Russia

andChinadiversifytheirforeign-exchangereserves—atrendthatislikelyto

continue.

“Centralbankbuyingis,ofcourse,importanttothesupply/demanddynamic

for the metal, but is much more important in terms of sentiment toward the

metal,”saysBrienLundin,editorofGoldNewsletter.Whencentralbanksare

“buyingasheavilyastheyare,itprovidescoverandarationaleforothercen-

tral banks to do the same.”

Russiancentralbankgoldreservesstandat2,219.2metrictons,according

totheWorldGoldCouncil,orWGC,basedonthelatestdataavailableinSep-

temberfromsourcesincludingtheInternationalMonetaryFund.China’shold-

ings are at 1,936.5 metric tons.

Giventhelatestprices,withthemost-activegoldfuturescontractsettling

at$1,499.50anounceonFriday,andabout32,151troyouncesinonemetricton,

the value of Russia’s gold reserves is at roughly $107 billion.

Themovesareduetoconcernsabouttheoutlookforcurrencies,including

thedollarandtheeuro,saysMarkO’Byrne,researchdirectoratGoldCorein

Dublin.“Whilethegoldtonnagedemandfromcentralbanksinrecentmonths

has been significant and near records, gold remains a tiny fraction of most

centralbanks’...foreign-exchangereserves,”hesays,addingthatthetrendis

“sustainable and indeed may accelerate.”

O’Byrne added that the risk of the trade war descending into a currency

war may also be feeding central bank diversification into gold.

Central banks had a record first half of the year, collectively buying 374

metrictonsofgoldthroughJune,saysJuanCarlosArtigas,directorofinvest-

mentresearchattheWGC.Thatwasthehighestfirst

halfoftheyearsincecentralbanksbecamenetbuy-

ersin2010.Netpurchasesfromcentralbanksyearto

datearestillbelowthoseof2018,butwiththesignifi-

cantlevelofcentralbankpurchasesthisyear,“wewilllikelybeabovethe10-

year average,” says Artigas.

The price of gold,whichhasclimbedtosix-yearhighsonandoffsinceJune,

hasn’t hurt that appetite for the precious metal. Gold futures settled at

$1,560.40 on Sept. 4, the highest finish since April 2013.

“Price is not the determining factor in central bank buying—rather, [the

banks]aremorelikelybeingguidedtosecureanallocationofapercentageof

theiroverallforeign-exchangereservesingoldbullion,”saysO’Byrne.Thecen-

tralbankdiversificationandhedgingarelikelytosupportgoldattheselevels

and could be a driver of higher prices in the coming months, he says.

TheWGCreportedthatgoldholdingsinRussiarepresent19.6%ofitstotal

foreign reserves, while gold holdings are a mere 2.8% share of China’s total

foreignreserves.“ChinaandRussiaareobviouslyintentoninsulatingthem-

selvesfromadollarizedglobaleconomy,andgoldseemstobeaveryimportant

part of that strategy,” Lundin says. “While gold still represents a relatively

smallportionofChina’stotalforeignreserves...[theChinese]seemtofeelthat

goldwillbecomemorevaluableovertime,whilethedollarwillbecomelessso.”

The rush of central bank gold buying doesn’t say much about wherenear-

termpricesofgoldareheaded,butitdoessay“alotaboutwhereit’sgoingover

the long term, or at least where the banks believe it’s going,” Lundin says.

Commodity Indexes,

Barrons.com

AUCTIONS

 
















 






















 

 !
"#$%&

!!'# ()

%
$ $


#"# !"#"*







 





#

+#",$$#$-".

/0.11.2333.#

#".

  

  

-4&-5+6-76

+%%64%-

%6-%

 




REACH

SERIOUS

INVESTORS.

Barron’s Classifieds is where our

readers discover opportunities in

real estate, business investments,

corporate aircraft, yachts, fine

cars and so much more.

For information on advertising,

call1.800.366.3975or email

[email protected]

COINS



    

 







 



 



        























  











     





 



           

  





 

           



     



 

 

 

 

 







     



  





 


     ! "# #$

 !

" 




 #

$ %& '$

   
( ! ) (
*

! % &   ! '

(