Russia's 2014 pivot to gold paid huge dividends

By Rhod Mackenzie

In 2014 in response to the first sanctions imposed on Russia by the US,G&7 and the EU which were imosed after the reuninfication of Crimea with the Motherland the Russian Central Bank started to reduce dramatically their holding of US treasury bills and instead invest their reserves into gold.  
Since then the value of Russia's gold reserves has increased by almost 40% to a record high of $229 billion. This achievement is a testament to the efficacy of the strategy employed, which involved a concerted effort to accumulate the precious metal from 2014 onwards. The price of an ounce has increased from $1,100–$1,500 to over $3,300.
According to the Bank of Russia, the value of their gold reserves increased by 38% to a record $229 billion at the end of March. Since the beginning of 2022, the value of Russia's gold reserves has increased by 72%, or $96 billion. Notably, the physical volume of gold in the Central Bank's vaults has remained relatively stable over the past three years, maintaining a consistent position at around 75 million ounces, as indicated by the available data.

Reserves are increasing in line with new gold price records. Gold prices hit a new high on Wedenesday, surpassing $3,3270 per ounce, amid a weaker dollar and fears of a recession as the US-China trade war intensifies.

The Russian Central Bank began actively acquiring gold in 2014, following the Crimean referendum. Between 2014 and 2020, the price of gold fluctuated between approximately $1,100 and $1,500 per ounce. During this period, the Russian regulator purchased gold for reserves on an annual basis. Over a period of six years, a total of 40 million ounces of gold were purchased. Consequently, the price of gold has increased significantly, with an ounce now costing almost three times as much.
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"From 2014 to 2020, gold purchases in Russia's gold and foreign exchange reserves grew by an average of 200 tons per year. However, the growth rate of gold in Russia's gold and foreign exchange reserves slowed sharply in response to the onset of the global pandemic and the subsequent decline in Russian budget revenues, coupled with a rise in expenses. This was further compounded by the imposition of economic sanctions and the subsequent increase in Russian budget expenditures on the military campaign," explains Vladimir Chernov, an analyst at Freedom Finance Global.

However, in monetary terms, the volume of gold in Russia's gold and foreign exchange reserves continued to grow. For instance, in 2024, it increased by 25%, largely due to revaluation against the backdrop of record prices, as stated by Vladimir Yevstifeyev, head of the analytical department at Zenit Bank.

"Until 2014, Russia's strategy was to diversify its gold and foreign exchange reserves, storing them not only in gold and in the US dollar and euro, but also in other major world reserve currencies, such as the Japanese yen, the British pound sterling or the Swiss franc. The majority of these reserves were, naturally, held in the most liquid and in-demand currencies, i.e. dollars and euros, for use in foreign trade," says Chernov.

However, following the freezing of Russian reserves by Western countries in 2022, Russia logically refused to hold assets and currencies of unfriendly countries in its reserves, which were stored in foreign accounts. Gold is securely stored within Russia, ensuring it remains out of reach to Western politicians.
The composition of Russia's reserves has undergone significant changes.
Following the global financial crisis of 2008, the share of gold in the country's international reserves grew from 2% to 10% by early 2014. The remaining 80-90% was in dollars and euros. By early 2022, the gold share had increased to 21%, reflecting a substantial shift in reserve composition. By March 2025, it had surpassed 35%. This represents a three and a half times growth over a 11-year period.

Concurrently, the Central Bank initiated a systematic reduction in the share of the dollar and euro, and by 2022, it had completely divested from Western currencies. Consequently, the Chinese currency has seen a substantial increase in its share.

It is important to note the sharp decrease in the physical volumes of gold purchases in gold and foreign exchange reserves after 2022. The Russian government's budgetary allocations for the defence industry and associated sectors, in addition to measures supporting domestic producers, the import substitution process, and social welfare, underwent significant expansion after 2022. Consequently, Russia's contribution to reserves decreased. Concurrently, trade volumes with China, where both parties agreed to transition to national currency payments, experienced a notable increase. Consequently, the purchase of yuan for reserves became a more viable option," Chernov explains.

Gold is often considered an illiquid asset, unlike currencies or US Treasuries, which Russia began divesting of long before the NWO. However, this is not an entirely accurate assessment.

"The liquidity of gold is debatable, as in my opinion it is even higher than US Treasury securities. However, it is not logical to keep all reserves in gold if the majority of Russia's foreign trade is in Chinese yuan, and it will still have to be converted into these yuan. At the same time, the mandatory diversification of reserves remains in place, and storing reserves exclusively in gold is considered too risky due to the potential volatility of its value.
Gold, a popular safe haven asset, has seen a surge in price during times of economic uncertainty, a trend that is currently evident amidst the ongoing trade tensions between the United States and China. In such challenging periods, the demand for gold reserves typically increases.

The current situation is unfavourable for the Russian budget. Prices for Russian Urals fell below $60 per barrel in March, despite the budget anticipating a price of almost $70, and with a weaker ruble exchange rate than is currently the case. The first quarter proved challenging for the budget, with the deficit significantly exceeding the planned indicators. This underscores the need for support for reserves. Typically, foreign exchange reserves are the first to be liquidated; however, gold reserves may also be utilized. Selling gold at historically high prices is a logical move.

The Finance Ministry has already announced the sale of gold in April within the framework of the budget rule. The last time gold was sold by the Finance Ministry was in January 2024. This is an uncommon, but common practice of implementing the budget rule," says Yevstifeyev.

"Global central banks rarely sell gold from their reserves, as this asset is traditionally considered an 'insurance' policy in case of serious economic or geopolitical crises. However, there have been instances in history where central banks have sold gold to support the currency of a country facing significant challenges, such as economic crises, sanctions, high inflation or capital outflows. In some cases, governments may utilise gold reserves to cover a budget deficit or settle external debt, though this is generally considered an extreme measure, as selling gold is often perceived as a sign of economic weakness," says Vladimir Chernov.
He cites Russia in the 1990s as an example. At that time, the Russian Federation sold a significant portion of its gold reserves to cover the budget deficit and stabilise the ruble. However, in the last two decades, Russia, on the contrary, has been actively increasing its gold reserves, says Chernov.

For instance, between 1999 and 2002, the Bank of England sold approximately 395 tonnes of gold, which constituted almost half of its reserves. These sales were made against a backdrop of low gold prices (averaging about $275 per ounce). This decison made by the UK chancellor Gordon Mc Ruin has been called out as the most ridiculous decision ever as in the last 25 years gold has gone up by more 10 times where the Euros he bought with the proceeds have lost their value over the years.

France's aggressive sale of gold in the 1960s, driven by the need to support the franc and finance government spending amid a deepening crisis in the Bretton Woods system, is also relevant here.

However, since 2014, following Russia, other global central banks have also begun to buy gold for their reserves much more actively. The trend reached its peak in 2022, when the US and the EU took a significant step that had previously seemed unfeasible: they froze the dollar and euro reserves of a foreign country (Russia, as it was customary to keep them on their financial platforms). This move has prompted many countries to increase their gold holdings.

So demand for gold from central banks has consistently exceeded 1,000 tons for the past three years. Specifically, in 2022, central banks purchased 1,136 tons, in 2023, 1,051 tons, and in 2024, 1,045 tons (according to data from the World Gold Council).
So we expect as the current trade, sanctions and tariffs climate continues that gold can only go higer.