First time visitor? Learn more.

Putin Buys Gold

by coldwarrior ( 24 Comments › )
Filed under Economy, Open thread, Russia at February 11th, 2013 - 6:00 pm

Who are the Socialists and who are the capitalists again?

Putin Turns Black Gold to Bullion as Russia Outbuys World

By Scott Rose and Olga Tanas – Feb 11, 2013

When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it.

Not only has Putin made Russia the world’s largest oil producer, he’s also made it the biggest gold buyer. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. The added gold is also almost triple the weight of the Statue of Liberty.

“The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency,” Evgeny Fedorov, a lawmaker for Putin’s United Russia party in the lower house of parliament, said in a telephone interview in Moscow.

Gold, coveted by Russian rulers including Tsar Nicholas II and the Bolshevik leader whose forces assassinated him, Vladimir Lenin, has soared almost 400 percent in the period of Putin’s purchases. Central banks around the world have printed money to escape the global financial crisis, sapping investor appetite for dollars and euros and setting off a scramble for safety.

In 1998, the year Russia defaulted on $40 billion of domestic debt, it took as many as 28 barrels of crude to buy an ounce of gold, data compiled by Bloomberg show. That ratio tumbled to 11.5 by the time Putin first came to power a year later and in 2005, after it touched 6.5 — less than half what it is now — the president told the central bank to buy.

Putin’s Call

During a tour that November of the Magadan region in the Far East, where Polyus Gold International Ltd. and Polymetal International Plc have operations, Putin told Bank Rossii not to “shy away” from the metal. “After all, they’re called gold and currency reserves for a reason,” Putin said, according to a Kremlin transcript.

At the time, gold was at an 18-year high of $495 an ounce and the Moscow-based central bank held 387 tons, or 2.2 percent of its $165 billion total reserves. The share reached 3.5 percent within a month, according to data compiled by Bloomberg.

Gold for immediate delivery fell a third day today, dropping 0.6 percent to $1,657.80 an ounce as of 4:35 p.m. in Moscow. It rose 7 percent last year, the 12th straight year of gains. Analysts expect the metal to advance again in 2013, to $1,825 by the end of the year, according to the median of 26 forecasts in a Bloomberg survey.

Dmitry Peskov, Putin’s spokesman, declined to comment today on Putin’s interest in gold.

Lucky Guy

“Putin’s gold strategy fits in with his resource nationalism, statist agenda,” said Tim Ash, head of emerging- market research at Standard Bank Plc in London. “It’s kind of a defensive play, but it worked, right?” Ash said in an interview in Moscow. “You need luck in politics and business, and clearly the guy has it.”

Other world leaders haven’t been as lucky. Gordon Brown, as U.K. finance minister, sold almost 400 tons of gold in the 30 months to March 2002, when prices were at two-decade lows. London tabloids have referred to the period as Brown’s Bottom.

Quantitative easing by major economies to support financial asset prices is driving demand for gold in the emerging world, said Marcus Grubb, head of investment research at the World Gold Council. Before the crisis, central banks were net sellers of 400 to 500 tons a year. Now, led by Russia and China, they’re net buyers by about 450 tons, Grubb said by phone from London, where his industry group is based.

‘Significant Switch’

“That’s a very significant switch, and obviously a very positive one for the gold market,” Grubb said.

While Putin is leading the gold rush in emerging markets, developed nations are liquidating. Switzerland unloaded the most in the past decade, 877 tons, an amount now worth about $48 billion, according to International Monetary Fund data through November. France was second with 589 tons, while Spain, the Netherlands and Portugal each sold more than 200 tons.

Even after Putin’s binge, though, Russia’s total cache of about 958 tons is only the eighth largest, the World Gold Council said in a Feb. 8 report. The U.S. is No. 1 with about 8,134 tons, followed by Germany with 3,391 tons and the Washington-based IMF with 2,814 tons. Italy, France, China and Switzerland are fourth through seventh. While gold accounts for 9.5 percent of Russia’s total reserves, it accounts for more than 70 percent in the U.S., Germany, Italy and France.

Truth Street

Russia keeps about two-thirds of its stockpile in a greenish gray stone-and-glass building on Ulitsa Pravdy, or Truth Street, in central Moscow. The road is named after Pravda, the official newspaper of the Communist Party, which also was headquartered there.

Then-Prime Minister Putin became the first Russian leader to visit the complex on Jan. 24, 2011, according to the government’s website. He toured the 17,000 square-meter facility, which includes 1,500 square meters of storage, with First Deputy Chairman Georgy Luntovsky, posing for photographs lifting an ingot. Most of the bars weigh 10 to 14 kilograms (22 to 31 pounds) and are boxed in plastic or wooden crates alongside an emergency supply of banknotes.

Technically, state metals depositary Gokhran has the exclusive right to buy all gold mined in the country. In practice, it lets commercial banks buy from producers directly, usually in the form of project financing, said Sergey Kashuba, chairman of the Russian Union of Gold Producers in Moscow.

When the central bank buys gold, it’s from those commercial banks, led last year by OAO Sberbank, OAO Nomos Bank, VTB Group and OAO Gazprombank, Kashuba said. Russia produced 205 tons of gold last year, making it No. 4 after China, Australia and the U.S., according to U.S. Geological Survey estimates.

Tight Security

Security is tight along the entire production chain, Kashuba said. Just two organizations are allowed to move partially refined gold from miners in the Far East and northern Siberia to processing facilities in other parts of the country, he said. One is FeldSvyaz, a courier service that reports directly to Putin. The other, SpetsSvyaz, was split off from Stalin’s NKVD secret police in 1939 to transport precious metals and state secrets, according to its website.

Russia has gone through bouts of hoarding before. Tsar Alexander II ordered his government to start amassing bullion in 1867, just months after selling Alaska, now the No. 2 gold- producing U.S. state, for $7.3 million. His grandson, Nicholas II, introduced the gold standard in 1897, then needed a loan from France to ward off speculators and save the system in 1906.

Lenin’s Link

Nicholas, Russia’s last tsar was forced to free the ruble in 1914 as war broke out in Europe. Lenin’s revolutionary government reinstated the gold link along with a new currency in 1922. While Soviet rubles were nominally backed by gold, sales of the metal to citizens were halted in 1930, making the peg meaningless.

When Lenin’s Bolsheviks seized power in Petrograd, as St. Petersburg was then known, in 1917, one of their first targets was the State Bank and its gold, which they captured at 6 a.m. on Nov. 7, according to Bank Rossii’s website. They soon nationalized all the banks, confiscating any gold found in vaults and deposit boxes.

Communist Secrecy

Communist secrecy regarding the country’s gold holdings fueled speculation that party elites had amassed a huge hoard of bullion that they spirited out of the country before the Soviet Union disintegrated in 1991.

Viktor Gerashchenko, the last Soviet central banker and a two-time chairman of Bank Rossii, has repeatedly denied such speculation, including last February.

“When people ask about the party’s gold, my answer is always: Are you an idiot or something?” Gerashchenko, 75, told Afisha magazine.

For now, with more than five years left in Putin’s term, Russia plans to keep on buying.

“The pace will be determined by the market,” First Deputy Chairman Alexei Ulyukayev said in an interview in Davos, Switzerland, on Jan. 25. “Whether to speed that up or slow it down is a market decision and I’m not going to discuss it.”

 

Comments

Comments and respectful debate are both welcome and encouraged.

Comments are the sole opinion of the comment writer, just as each thread posted is the sole opinion or post idea of the administrator that posted it or of the readers that have written guest posts for the Blogmocracy.

Obscene, abusive, or annoying remarks may be deleted or moved to spam for admin review, but the fact that particular comments remain on the site in no way constitutes an endorsement of their content by any other commenter or the admins of this Blogmocracy.

We're not easily offended and don't want people to think they have to walk on eggshells around here (like at another place that shall remain nameless) but of course, there is a limit to everything.

Play nice!

24 Responses to “Putin Buys Gold”
( jump to bottom )

  1. 1 | February 11, 2013 6:30 pm

    Those evil Communists!
    ////

    Oops, this is 2013 not 1982. My bad!


  2. 2 | February 11, 2013 6:31 pm

    @ Rodan:

    I had no idea he listened to Glenn Beck.


  3. lobo91
    3 | February 11, 2013 6:33 pm

    Rodan wrote:

    Those evil Communists!
    ////
    Oops, this is 2013 not 1982. My bad!

    The communists are in DC now.


  4. heysoos
    4 | February 11, 2013 6:37 pm

    sold off most of my gold last year at $1580oz….made a killing, had almost nothing into it, but it doesn’t seem like much now that it’s in the bank…I have no income


  5. buzzsawmonkey
    5 | February 11, 2013 6:37 pm

    “Putin’s Gold” sounds like a movie title…


  6. heysoos
    6 | February 11, 2013 6:40 pm

    buzzsawmonkey wrote:

    “Putin’s Gold” sounds like a movie title…

    or a pop music tv show…you can dance to it


  7. heysoos
    7 | February 11, 2013 6:45 pm

    back in the 70′s I used to read the Kiplinger Report…I was frightful of the govt, rolling in dough and always took their advice…I bought a lot of antiques, jewels, metals and property…all these years later and lo and behold he was right…I never lost money, but now I’m down to an emergency stash and I doubt I can live on what I have now, so that will go too…I cashed out of the market when BO was elected in 08


  8. heysoos
    8 | February 11, 2013 6:52 pm

    where is Chris Dorner?….
    he must be pretty good


  9. 9 | February 11, 2013 7:03 pm

    I dig the whole “majority wins” part of elections, but when some 52% feel perfectly comfortable in openly trashing people of faith (except, gawd forbid, ISLAM), actively disassembling every institution and tradition that many of us hold dear, recklessly exposing us militarily, ruining us economically and worshipping the President in the manner of a demigod, I have a very, VERY serious problem.

    These were elections we had in ’08 and ’12, not coups and not revolutions. The party in power DOES NOT have the privilege of destroying the vanquished and riding roughshod over the last 230 years of history. The party in power DOES NOT have the privilege of defining compromise as “do it my way, I won”- the 48% still deserve to be heard, and our voices need to be respected.

    I don’t think I’m even close to being alone in getting fed up, in fact I know I’m not. Frustration is a dangerous emotion to the subject of that frustration and it grows by the day.

    In the words of Howard Beale, “I’M MAD AS HELL AND I’M NOT GOING TO TAKE THIS ANY MORE!”


  10. heysoos
    10 | February 11, 2013 7:14 pm

    @ MacDuff:
    I’ve been pissed for 40 years…
    people bow before the feds…spit
    they treated my Marine vet dad like shit, same as today…
    I’ve spent 13 months dealing with the feds regarding his death and benefits for my mom locked up in a nursing home type place…I was told that my request would take up to 72 hours…that was LAST YEAR!…morons run the govt, it’s rampant, expensive, and people suffer…I have zero use for fed employees, let alone the wizards inside the beltway…you just want to scream


  11. lobo91
    11 | February 11, 2013 7:15 pm

    heysoos wrote:

    where is Chris Dorner?….
    he must be pretty good

    Sitting in a chair someplace watching the cops chase their tails on TV would be my guess.


  12. The Osprey
    12 | February 11, 2013 7:16 pm

    httpv://www.youtube.com/watch?v=HXJefJOU5OE


  13. lobo91
    13 | February 11, 2013 7:16 pm

    @ heysoos:

    I was told that my request would take up to 72 hours…that was LAST YEAR!…

    Did they actually say that it would be 72 consecutive hours?
    //


  14. lobo91
    14 | February 11, 2013 7:18 pm

    heh…sounds like someone in Congress was listening to me. One of them invited Ted Nugent to be his guest at the State of the Union.


  15. heysoos
    15 | February 11, 2013 7:19 pm

    my brother spent three tours in Viet Nam…two bronze stars, two purple hearts and all the other crap…he despises the feds for the way they have treated him regarding his wounds etc…all his vet buddies feel the same…there is something foul out there…you risk life and limb for them because you feel it’s your duty, then they shit on you, not once but over and over…fuck the govt, they won’t get an ounce of sweat out of me, ever


  16. Guggi
    16 | February 11, 2013 7:32 pm

    Obama doesn’t even respect the requests of fallen Seals

    httpv://www.youtube.com/watch?v=HNdGZZOHT_4


  17. heysoos
    17 | February 11, 2013 7:34 pm

    I mixed it up with the IRS when I sold my construction business…I disputed their claims regarding capitol gains and unearned benefits…it was a paltry $8500 bucks but I refused to pay and it went to court…this went on for seven months…they hassled and harassed me…they started calling my wife at work, a supervisor RN on the afternoon (busiest) shift at a Level 1 trauma center…I was jailed for contempt…the fuckers were relentless…and in the end I won and actually expected a check in my hand…no, I had to SUE them to get my own money back with a wink/nod guarentee to recover my funds…spend another 5k to recover 3K?…fuck them, they can keep it…I hate those guys with every ounce of my flesh


  18. Dolphin
    18 | February 11, 2013 7:56 pm

    @ Guggi:
    That is truly sick.*

    * I was going to add “if true”, but I don’t doubt it one bit with this piece is sh!t.

    Your stories fascinate me. You are one of the ones here I would truly like to meet and have a beer or ice tea with!


  19. Dolphin
    19 | February 11, 2013 8:07 pm

    Oops. Didn’t pick up the second “quote”

    Dolphin wrote:

    @ Guggi:
    That is truly sick.*

    * I was going to add “if true”, but I don’t doubt it one bit with this piece is sh!t.

    @ heysoos:

    Your stories fascinate me. You are one of the ones here I would truly like to meet and have a beer or ice tea with!


  20. heysoos
    20 | February 11, 2013 8:23 pm

    Dolphin wrote:

    Oops. Didn’t pick up the second “quote”
    Dolphin wrote:
    @ Guggi:
    That is truly sick.*
    * I was going to add “if true”, but I don’t doubt it one bit with this piece is sh!t.

    @ heysoos:
    Your stories fascinate me. You are one of the ones here I would truly like to meet and have a beer or ice tea with!

    everybody has stories to tell…sometimes I get carried away


  21. heysoos
    21 | February 11, 2013 8:26 pm

    this settles it…no shit rock and roll
    httpv://www.youtube.com/watch?v=m_CUzuitxSI


  22. Dolphin
    22 | February 11, 2013 8:38 pm

    @ heysoos:
    ;)

    I enjoy them.

    Keep sharing. I lurk a lot and post a little!


  23. lobo91
    23 | February 11, 2013 8:41 pm

    Democrats Offer “Prebuttal” To Marco Rubio’s State Of The Union Republican Rebuttal…

    In preparation for President Barack Obama’s State of the Union address on Tuesday night, the Democratic National Committee on Monday gathered lawmakers for a conference call with reporters to offer a “prebuttal” to Florida Sen. Marco Rubio’s not-yet-delivered Republican rebuttal to Obama’s not-yet-delivered national address.

    “Given the late hour [scheduled for Rubio's on-camera response] we thought this would be a good opportunity for us to make some comments about what we anticipate based on the record that we have that Sen. Rubio is likely to address and how we would respond to that,” DNC spokesman Brad Woodhouse said on the call. [...]

    The prebuttal call also included DNC Chairwoman Rep. Debbie Wasserman Schultz of Florida, Maryland Rep. Chris Van Hollen, and Annette Capella, introduced as a “senior citizen” and “Medicare recipient from Florida” (a bio that’s accurate, if not complete—she’s also the former chairwoman of the St. Johns County Democratic Party in northern Florida).

    Just as Obama’s speech and Rubio’s response will likely be full of focus-grouped buzzwords, the Democratic prebuttal contained typical partisan rhetoric repackaged for the occasion. For instance, Wasserman Schultz said Rubio wanted to “gut Medicaid” and would “devastate seniors” by supporting “an extreme view of government that would dismantle America’s social safety net in order to pay for tax cuts for millionaires and billionaires.”

    So…we can’t do anything about Medicare or Social Security (any changes to which wouldn’t take place for decades), so we’re just supposed to stand by and watch the country implode, instead?

    Isn’t that going to “devastate seniors,” too?


  24. Da_Beerfreak
    24 | February 11, 2013 10:59 pm

    lobo91 wrote:

    Democrats Offer “Prebuttal” To Marco Rubio’s State Of The Union Republican Rebuttal…

    In preparation for President Barack Obama’s State of the Union address on Tuesday night, the Democratic National Committee on Monday gathered lawmakers for a conference call with reporters to offer a “prebuttal” to Florida Sen. Marco Rubio’s not-yet-delivered Republican rebuttal to Obama’s not-yet-delivered national address.

    “Given the late hour [scheduled for Rubio's on-camera response] we thought this would be a good opportunity for us to make some comments about what we anticipate based on the record that we have that Sen. Rubio is likely to address and how we would respond to that,” DNC spokesman Brad Woodhouse said on the call. [...]

    The prebuttal call also included DNC Chairwoman Rep. Debbie Wasserman Schultz of Florida, Maryland Rep. Chris Van Hollen, and Annette Capella, introduced as a “senior citizen” and “Medicare recipient from Florida” (a bio that’s accurate, if not complete—she’s also the former chairwoman of the St. Johns County Democratic Party in northern Florida).

    Just as Obama’s speech and Rubio’s response will likely be full of focus-grouped buzzwords, the Democratic prebuttal contained typical partisan rhetoric repackaged for the occasion. For instance, Wasserman Schultz said Rubio wanted to “gut Medicaid” and would “devastate seniors” by supporting “an extreme view of government that would dismantle America’s social safety net in order to pay for tax cuts for millionaires and billionaires.”

    So…we can’t do anything about Medicare or Social Security (any changes to which wouldn’t take place for decades), so we’re just supposed to stand by and watch the country implode, instead?

    Isn’t that going to “devastate seniors,” too?

    How about we jus go back to having the prez send a letter to the Congress each year until some sanity returns to DC Town…

    (I know. Fat chance of that ever happening…)


Back to the Top

The Blogmocracy

website design was Built By David