Russia's De-Dollarization Continues as they Dump $22 Billion in Treasuries in December

[Smaulgld]

Last month we showed how Russia had been decreasing its holdings in U.S. Treasuries while increasing its gold reserves.

We showed Russia's US Treasury holdings as of November 2014 and their gold holdings as of December 2014.


The U.S. Treasury reported today that Russia has reduced its U.S. Treasury holdings to $86 Billion in December from $108 Billion in November.

Later this month Russia will release its gold holdings as of January 2015.

https://smaulgld.com/foreign-holdings-u-s-treasuries/

 

[Zippyjuan]

Russia has been dumping some of their foreign currency holdings to try to stop the collapse of the ruble.

 

[Smaulgld]

Russia has been dumping some of their foreign currency holdings to try to stop the collapse of the ruble.

Yes but much of the selling has had a corresponding gold purchase

 

[fatjohn]

Define much. 22 Billion would buy 550 tonnes. I'd say that they probably haven't even used 10 percent of the treasury notes sales to buy gold with.

 

[Smaulgld]

Russia has been buying 600k+ ounces a month for over a year or about $720 million a month or close to $10B in 2014

 

[Zippyjuan]

Which means they didn't dump their Treasuries for gold since they redeemed $20 billion in just one month- when they added $720 million in gold. I know China is getting most of their gold reserves from their own production- maybe Russia is doing the same thing- given that both the government and the mining industry are pretty much controlled by a small group of oligarchs. In 2013 they produced 254 metric tons and only exported 6.5 metric tons. http://www.e-mj.com/features/4622-r...wth-in-gold-mining-industry.html#.VOaG9ObF_T8

And, according to official data ofthe Russian Union of Gold Producers (RUGP), Russian gold production increased by 12.6% year-on-year in 2013 to 254 metric tons (mt). Exports of gold concentrates increased by 63.2% year-on-year to 6.5 mt. In comparison, China last year increased gold production by 6.2% to 428 mt.

The Russian government, which is actively investing in mineral exploration in Siberia and the Far East, often changes its forecasts for the development of mining in this region, because it doesn't really know how large the region's resources are. An optimistic forecast predicts that after 2017 the volume of gold mining there will exceed 250–270 mt, about 60–80 mt more than current production.

Maybe they get "payment in kind" for allowing the mines to operate.

 

[Zippyjuan]

This article is from December- http://www.cnbc.com/id/102275178

Russian Finance Ministry starts selling foreign currency

Russia's Finance Ministry said on Wednesday it was starting to sell its leftover foreign-currency stock and that it considered the ruble to be undervalued.

Separately, Prime Minister Dmitry Medvedev called on Russia's top exporters to behave "responsibly" and manage their foreign currency revenues in a way that would not boost ruble volatility, the government's press office said. At a meeting with Russian exporters, Medvedev also told First Deputy Prime Minister Igor Shuvalov, along with the central bank, to monitor the flows of foreign currency revenues on the market daily.

The Finance Ministry said it was selling foreign exchange currency from its leftover stocks, of which it has around $7 billion, according to Reuters. The ministry did add in a statement that it considered the ruble "extremely undervalued," however.

A combination of sanctions imposed by the West on Russia for its intervention in the crisis in Ukraine, economic problems at home and the continuous slide in the price of oil have all contributed to the ruble's recent troubles.

 

[Smaulgld]

Keep in mind they could have sold $22 B of gold instead of Treasuries. They are in the process of selling off their US Treasuries

 

[Dforkus]

Keep in mind they could have sold $22 B of gold instead of Treasuries. They are in the process of selling off their US Treasuries

And one should keep in perspective the scale of the broader treasury market... 22B is marginally significant at best.

The 10 year note as I type this is 2.07%, historically low. The high-functioning psychotic in the Kremlin notwithstanding: demand remains robust among large institutions and governments, as reflected in this rate.

Not that I'm advising them as a personal investment vehicle, as there are plenty of ways, especially if you have a mortgage, to beat 2.07%.

 

[Zippyjuan]

Keep in mind they could have sold $22 B of gold instead of Treasuries. They are in the process of selling off their US Treasuries

To support the ruble, they need to use other currencies to buy rubles with. To use gold, they would have to sell it for dollars (or Euros) and then use the dollars to buy rubles. Selling Treasuries is more direct. China gets dollars to support their exchange rate against the yuan by selling us goods in exchange for dollars. By keeping them in dollars, it doesn't drive up the value of the yuan against the dollar like it otherwise would.

 

[acptulsa]

To support the ruble, they need to use other currencies to buy rubles with. To use gold, they would have to sell it for dollars (or Euros) and then use the dollars to buy rubles. Selling Treasuries is more direct.

You can't buy gold with rubles any more? So now we not only have the petrodollar, but the gildedollar? You prop up a fiat currency by taking some of it out of circulation. Doesn't much matter how you get your hands on what you stash away. It certainly doesn't help to initially buy up a bunch of the competing currency, thereby artificially increasing demand for it.

 

[Zippyjuan]

Sure Russia can sell their gold for rubles- but that doesn't help them to try to raise the value of their currency against other ones like the dollar, yen, and Euro. It has lost more than half its value against those currencies.

 

[acptulsa]

Sure Russia can sell their gold for rubles- but that doesn't help them to try to raise the value of their currency against other ones like the dollar, yen, and Euro. It has lost more than half its value against those currencies.

So why don't you turn off you Amazing Green Worm Growing Machine so you can concentrate and tell us all how gathering and sitting on rubles fails to first increase the demand, then reduce the supply of them? I'm sure we're all agog to hear it.

 

[Dforkus]

Sure Russia can sell their gold for rubles- but that doesn't help them to try to raise the value of their currency against other ones like the dollar, yen, and Euro. It has lost more than half its value against those currencies.

Moody's joins SandP in cutting Russian bonds into true junk status:
http://www.huffingtonpost.com/2015/02/20/moodys-downgrades-credit_n_6724766.html

Putin... the international chess master strikes again...

 

[Smaulgld]

Here is the follow up http://www.ronpaulforums.com/showth...ary-after-selling-22B-of-US-Treasuries-in-Dec

 

[Smaulgld]

One thing Russia and China could do and its not that far fetched. Once they have amassed large quantities of gold they can pull an FDR and unilaterally reprice it much higher.

 

[Smaulgld]

And one should keep in perspective the scale of the broader treasury market... 22B is marginally significant at best.

The 10 year note as I type this is 2.07%, historically low. The high-functioning psychotic in the Kremlin notwithstanding: demand remains robust among large institutions and governments, as reflected in this rate.

Not that I'm advising them as a personal investment vehicle, as there are plenty of ways, especially if you have a mortgage, to beat 2.07%.

Agree $22 B is marginally significant as are their remaining $86B- nothing more than one month of QE3

 

[Smaulgld]

The other thing Russia could do to increase demand for roubles is to require them for payment for their oil

 

[Zippyjuan]

One thing Russia and China could do and its not that far fetched. Once they have amassed large quantities of gold they can pull an FDR and unilaterally reprice it much higher.

They might be able to change the price of gold in terms of their currencies (by say devaluing them which is what FDR did- China might but Russia doesn't want since they are trying to RAISE the value of their currency) but by merely holding more gold, they can't change the global price of gold. They would have to buy and sell huge amounts on the open market to do that. They can't unilaterally change the price of gold in the market.

 

[Smaulgld]

Sure they can if the worlds number one and three gold mining countries who may now hold more above ground gold combined than all other countries decide to do it they can