Russia Adds Record 1.3 Million Ounces Of Gold During October

Short-term investor sentiment may have turned bearish towards gold over the past week, but 2016 is still shaping up to be a very strong year for overall demand. Part of the reason is that central banks are still buying aggressively.

The Central Bank of the Russian Federation added 1.3 million ounces (40.4 tons) of gold to its reserves during October. This is a new monthly record and more than 2.5 times as much as was added in September. Russia now claims an official 50.9 million ounces (1583.167 tonnes) in total gold reserves.

From the start of 2014 until the start of November 2016, just under three years, Russia has increased their official gold reserves by over 50%! Not coincidentally, they also cut their U.S. Treasury holdings by nearly 50% over the same time period.

Of course, they are buying domestic production, and Russia was the second biggest gold producer in 2015, mining 290 metric tons.

Russia has also been buying gold to try to diversify its reserves and make its economy more resilient to external pressure including sanctions. But part of the huge increase during October is due to the central bank tweaking its reserve rules so that gold held in unallocated bullion accounts at banks could be included in its reserves.

China has also been expanding their gold reserves at a rapid pace. It appears that central bank appetite for gold continues unabated. This should provide support for the gold price going forward.

Russia's largest gold company is Polyus Gold (OTC:PGILF). It is also one of the world's top 10 gold producing companies, producing over 1.6 million ounces of gold annually. The company has nearly 100 million ounces of either proven or probable reserves of gold. Its annual production increased at 7% annually between 2005 and 2015. Polyus' principal mining operations are located in several provinces of Eastern Siberia and in the Far East.