First, Russia dumped record amount of US treasuries this year. They replace US paper part of country’s foreign exchange reserves by gold. Actually, it could be a right move (long term) if one believes that US treasuries are in the bubble and gold price is close to the bottom. Besides, they are afraid that due to the new sanctions Russia will be unable to sell its USD reserves in future.
Second, Russia buys most of the gold from domestic producers who, according to Russian laws, cannot sell it on the open market without CB authorization. Basically, they just move own gold production into Central Bank. Many totalitarian governments (China, Venezuela, etc.) do the same – buying up all domestic gold. Of course, this is still bullish for gold prices because it removes some supply from the market. OTOH, at some point, after all foreign currency reserves are exhausted; Russia will be forced to sell its gold to support domestic economy. That’s what Soviet Union used to do just to feed its population.
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