GIG-OS ENGLISH: Oil fluctuations: Russia is heading for precious assets

Oil fluctuations: Russia is heading for precious assets

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Precious metals are solid safe-haven assets in times of crisis. By 2016, Russia has accumulated 1460.3 tons of gold, and, according to the news, is not going to stop following this strategy.

Why does Russia favors gold?

Diamonds

According to Deputy Finance Minister of the Russian Federation Alexey Moiseev, the Ministry of Finance is planning to buy diamonds worth of 5 billion rubles to enlarge national reserves in 2016. Precious metals may also be purchased, following the tactics of recent years. For example, in 2014 the state Gokhran fund purchased 3.4 tons of gold, and commercial banks obtained 150 tonnes of the yellow metal.

One of possible reasons for choosing diamonds as a reserve asset is the local diamond miners' support. This decision was made in 2008-2009 in order to save the diamond mining company "ALROSA" from bankruptcy.

Gold

As for gold, it generally forms a part of foreign-exchange reserves. Not only the Ministry of Finance is purchasing gold, but also the Central Bank of the Russian Federation: last year it bought more than 200 tons of the yellow precious metal.

Oil

The recent crisis and the decrease in oil production have reduced the gold reserves of the country. Now the process of reserves' replenishment is on to guarantee currency stability. Since the beginning of 2016, oil increased by more than a quarter, while foreign-exchange reserves gained only 6%, which means the time for active purchasing has come, said one of the IFC Markets experts Dimitry Lukashov

And gold again

Of course, it is possible to enlarge the reserves with securities, but due to the current low yields it is not wise, said Lukashov. Alternatively, he suggests diamonds and precious metals, particularly, gold. He points out that the opening of new large deposits is not anticipated, thus, benefiting gold prices in the market.

In the times of economic instability safe-haven assets are the best solution. Reserves can be protected not only on the state level, but also personally: anyone can buy gold and gain financial stability.

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