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russia to double gold reserves

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    Friday, November 25, 2005


    Russian Central Bank Gold Reserves to Double


    The Russian Central Bank has announced that it is to double its gold reserves.
    a move that Michael Kosares of USA Gold says is "the equivalent of the Washington Agreement in 1999, which kick-started the current gold bull market."

    Kosares predicts the announcement could have a major impact on the gold price and may be the driving force for the second leg of this gold bull market.

    Russian President Vladimir Putin said this week he endorsed the plan of
    the Central Bank of Russia to double its gold reserves, and expressed
    support for increasing Russia's gold production.

    The Russian News and Information Agency reports the Central Bank of Russia's first deputy chairman, Alexei Ulyukayev said the bank would be buying gold "on all markets on which it is available," meaning both domestic and foreign markets.

    Michael Kosares of USA Gold provides the following observations:

    1. We should not forget that it was central bank buying that broke
    the back of the anti-gold cartel in the late 1960s early 1970s. This
    paved the way for the massive bull market of the 1970s.

    2. Ulyukayev is not talking about paper trading for speculative
    purposes. He's talking about buying physical gold and storing it in
    reserve as a long-term asset.

    3. This policy is a major, decisive departure for the G-8 in that
    one of its members will be exchanging currency reserves for gold --
    and after a public disclosure. Russia now is receiving a large
    amount of foreign exchange for its oil and gas (this will not change
    for quite some time), probably in the form of dollars and euros.
    This looks like the first step in a long-term program.

    4. Russian gold buying will become a new element in the physical
    gold market, and likely will put even more pressure on those short
    the metal to cover now while it is still cheap -- of course, that
    Russia follows through. But I can't see why they would announce such
    a plan without meaning it.

    5. I rate this announcement by the Russian central bank as the
    equivalent of the Washington Agreement in 1999, which kick-started
    the current gold bull market. It amounts to a de-jure action that
    could have a major impact on the gold market and comprise the
    primary driving force for the second leg of this bull market.
 
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