Russia banks on gold as insurance against currency woes

When Vladimir Putin says the US 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 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% 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 euro and setting off a scramble for safety.

In 1998, the year Russia defaulted on $40bn 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.

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 $48bn, according to IMF 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. The US .is No. 1 with 8,134 tons, followed by Germany with 3,391 tons and the IMF with 2,814 tons. Italy, France, China and Switzerland are fourth through seventh.

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