Russia’s central bank sees no need in raising gold holdings in its gold and forex reserves, its deputy governor, Alexei Zabotkin said on Tuesday, shrugging off a plea from the gold miners to increase state purchases amid Western sanctions.
The association of the Russian gold producers told a meeting of officials at Russia’s upper house of the parliament on Tuesday that the government should support the industry with purchases amid sanctions on the Russian banks and disrupted exports.
“In terms of accumulating gold in gold and foreign exchange reserves, this is something that is not advisable at the moment, due to the fact that it would create an additional impetus to the growth of the money supply,” Zabotkin told the same meeting.
He said that Russia’s central bank made gold purchase on the domestic market in March and April, but those “were small volumes.”
Sergei Kashuba, the head of Russia’s Gold Industrialists’ Union, told the meeting that the central bank’s purchases in spring were carried out with a 12-15% price discount to the London gold prices.
Western sanctions, imposed shortly after Moscow sent its troops to Ukraine on Feb. 24, froze around half of Russia’s gold and forex reserves. The sanctions also hit the country’s main banks which used to be the main buyers of the miners’ gold.
In a further blow, the London Bullion Market Association suspended Russian gold refineries from its “good delivery” lists.
“After that no one wanted our bullion outside Russia … Third-party countries took the advantage of the situation and started asking for discounts… even more of what the central bank was asking for,” an official at the finance ministry, Yuliya Goncharenko, told the meeting.
In order to support the Russian gold trade, officials are in talks with the Shanghai Gold Exchange about admission of gold bars produced by two of the Russian refineries, she added.
Kashuba said that without massive state gold purchases and subject to the rouble remaining strong, miners of small and medium size would face zero or negative profit margin by the year-end.
(By Anastasia Lyrchikova, Elena Fabrichnaya and Polina Devitt; Editing by Marguerita Choy)