China’s gold purchases from Russia reach a historic high

According to a report by RIA Novosti based on Chinese customs data, the Beijing government purchased a record $961 million worth of gold from Russia last month.

This figure marks the largest transaction in the history of precious metal trade between the two countries.

In October, Russia’s gold exports to China also reached $930 million, with high supply volumes continuing for the second consecutive month.

In the first 11 months of the year, the amount of gold China imported from Russia reached $1.9 billion, marking a nearly nine-fold increase compared to the same period last year.

Last year, gold supplies were either nonexistent or did not exceed $223 million.

Beijing is changing its reserve policy

This sharp increase in purchases coincides with Beijing’s active policy of strengthening its gold reserves and reducing its dependence on the dollar.

According to a Financial Times report last month, China may have purchased several times more gold this year than what appears in official records.

Societe Generale estimates that the purchase volume could reach approximately 250 tons, which corresponds to more than one-third of all purchases made by global central banks this year.

The Financial Times also noted that these volumes contributed to the rapid rise in gold prices, which have increased by approximately 55% since the beginning of the year.

Central Bank begins physical sales

In late November, it was announced that the Central Bank of Russia had begun selling physical gold from its reserves for the first time to finance the state budget.

According to the Interfax agency, citing the Central Bank’s press office, the bank has started to “mirror” the Ministry of Finance’s transactions with gold from the National Wealth Fund (NWF).

Previously, such transactions were conducted virtually; the government would sell gold to the Central Bank, but the bullion would remain in the country’s reserves. Now, however, the transactions are physical in nature.

Since the beginning of the war, the Ministry of Finance has sold off 57% of the Wealth Fund’s gold reserves to cover the budget deficit. Of the original 405.7 tons of reserves, 173.1 tons of gold remained as of November 1, 2023. The fund’s total liquid assets, consisting of gold and yuan, decreased by 55%, falling from $113.5 billion to $51.6 billion.

According to Ministry of Finance data, a shortfall in oil and natural gas revenues is expected in December of this year compared to the baseline level. This deficit is planned to be offset by selling foreign currency and gold from the Wealth Fund.