Difficult to see for now if Russia is using gold to evade sanctions: UBS

  • It’s hard to see right now if Russia is using gold to circumvent sanctions, said UBS strategist Joni Teves.
  • It will be months before changes in the Russian central bank’s gold holdings can be verified, she told CNBC.
  • Any sale of Russia’s $140 billion stockpile of gold could help bolster the beleaguered rouble.

It’s hard to see at this time whether Russia is using its gold reserves to circumvent international sanctions, said a UBS precious metals strategist.

Western leaders on Thursday clamped down on Russia’s ability to sell off its gold reserves to prop up its economy, which is under pressure from financial sanctions imposed soon after the country’s war with Ukraine.

The Biden administration said there were signs the Russian central bank was looking to use its gold reserves to prop up the rouble, which plunged to less than a penny following the invasion. The UK has also raised concerns about the potential escape.

Asked by CNBC if there was any evidence of this, UBS strategist Joni Teves suggested it will be months before any changes in the Russian central bank’s gold holdings can be verified.

She noted that several steps must be taken for the central bank to sell gold.

“It will be difficult to see that impact in the market immediately, given the different stages,” Teves said in an interview with CNBC on Monday.

“And also given that even in normal situations it takes a few months before we see the report on changes in central bank holdings at the IMF.”

Russia has increased its gold holdings over the past decade, she noted. The country has the fifth largest stock of gold in the world with around 2,300 tonnes, estimated at $140 billion.

He has been building up a reserve of the precious metal as a sort of economic insurance policy, but the sanctions have made it difficult for Russia to find buyers.

“Our sense is that recent events continue to reinforce this trend — among emerging market central banks, in particular — to diversify their gold reserves,” Teves said.

Earlier in March, Russia’s central bank suspended gold purchases from banks as the ruble’s collapse helped boost consumer demand for the precious metal.

Teves suggested that investors seeking shelter from the dispute, now in its second month, set the direction for gold prices.

“Since early February, flows into safe havens have really been the main driver of gold price action,” she said. “We believe this continues to be the main driver of gold prices, especially if you look at it from a long-term perspective.”

She said the relationship between gold and real rates was starting to normalize, after crashing earlier in the year.

Gold futures fell 0.8% to $1,937.90 an ounce on Monday on the prospect of aggressive interest rate hikes by the

Federal Reserve

This year. But his call has also dimmed hopes for progress in face-to-face ceasefire talks between Russia and Ukraine this week.


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