Russia Boosts Gold and Currency Purchases Amid High Oil Prices

Russia's Finance Ministry plans to invest approximately 280 billion rubles in gold and foreign currency between October 7 and November 6. This represents a fivefold increase from September's allocation of 56 billion rubles, which itself was a sharp drop from August's 136 billion rubles. The purchases are made under Russia's fiscal rule, which directs oil and gas revenue above a $59 per barrel cut-off into the National Wealth Fund.

The surge in allocations reflects the recent rally in crude oil prices, with Brent trading around $100 per barrel due to Gulf supply disruptions. Higher energy prices have boosted Russia's energy revenue, leading to larger surpluses being set aside for reserves. However, the exact split between gold and currency purchases remains undisclosed, limiting the ability to gauge the direct impact on the gold market.

For the gold market, this timing is significant as spot gold prices fell more than 6% in September. The increased Russian buying program adds a source of official-sector demand, potentially aiding price stabilization. The Bank of Russia carries out these operations on behalf of the Finance Ministry, although it has been offsetting part of the purchases with sales from reserves, reducing net buying in September to around 1.9 billion rubles a day.

The escalation in purchases highlights how the Gulf supply shock is benefiting Russian state finances. Sanctions aimed at curbing Russia's energy earnings have inadvertently kept global prices elevated, allowing Moscow to bolster its reserves with the higher revenue.