US efforts to suppress gold prices to support the dollar are allowing Russia and China to accumulate huge reserves of physical gold by buying up large quantities of the precious metal at significantly lower prices.
Net purchases by the Central Bank in the first quarter of this year increased 42% compared to the same period last year, totaling 116,500 tonnes, according to data compiled by the World Gold Council (WGC). The number represents the highest quarterly total since 2014.
In the last two decades, Russia has been increasing its purchases of physical gold. In May, the country’s gold reserves rose to 1,909 tonnes, the Russian Ministry of Finance said. Since 2000, the country’s gold reserves have risen by 500%.
Russia continued to be the most prolific buyer of gold in the first quarter of 2018. The country currently holds 18 percent of total reserves, according to the WGC.
Last month, Russia was able to pull China off top spot of the top five gold holders, which also includes the United States, Germany, Italy and France. However, China is not far behind, with 1,183 tonnes of gold registered in its national reserves.
China and Russia, along with Turkey, India and other countries, have accumulated gold reserves aggressively in an attempt to diversify their financial assets from the dollar’s reserve that currently serves as the global reserve currency.
The trend presents a perfect opportunity for investors to buy gold or shares in gold mines while putting the dominance of the dollar at risk as the main global reserve currency.
Many gold investors say the price of precious metal is artificially controlled because of the trading of paper gold on the Western stock exchanges.
According to Claudio Grass of Switzerland’s precious metals consultancy, the total volume traded in the over-the-counter (OTC) gold market in London is estimated at 1.5 million tonnes of gold. Only 180,000 tonnes of gold have been mined to date.
“Paper scams in London and New York will explode when the price of paper falls to zero or when only a fraction of investors insist on receiving physical gold in return,” Grass told RT.