Russia's sovereign gold holdings have fallen to 72.8 million troy ounces, or 2,264 tonnes,the lowest volume since late 2019. The Bank of Russia is selling off these assets to cover a growing federal budget deficit driven by the ongoing conflict in Ukraine.
A 2,264-tonne floor and the ghost of the 1998 crisis
The current liquidation of gold by the Bank of Russia represents the most sustained drawdown of precious metal reserves since the Russian financial crisis of 1998. According to reporting from Kitco News,the central bank has now reduced its gold holdings for ten consecutive months, a stark pivot from the aggressive accumulation strategy Moscow employed prior to the 2022 invasion of Ukraine.
This reversal suggests that the "fortress economy" strategy—designed to insulate Russia from Western sanctions by hoarding non-dollar assets—is being cannibalized to maintain immediate state functions. By selling approximately 62 tonnes of gold in recent months, the Russian government is prioritizing short-term liquidity over long-term strategic reserves.
Funding the 38% military spending projection for 2026
The primary driver of this asset sale is a ballooning federal budget deficit. As the conflict in Ukraine persists, the Russian state is shifting an unprecedented portion of its national wealth toward the defense sector. The report indicates that military and security expenses are projected to consume 38% of total federal spending by 2026.
This massive reallocation of capital explains why the Bank of Russia can no longer afford to simply hold bullion. When traditional revenue streams are strained or frozen by international sanctions, the sovereign gold pile becomes the only reliable source of funding for the Russian military-industrial complex.
The $1 billion surge in Chinese imports of Russian ore
While the Bank of Russia sells its reserves, the country's raw mineral exports are shifting toward the East.. Bloomberg reported that Chinese imports of Russian precious metal ores and concentrates, including gold and silver, jumped 80% to $1 billion over the same period a year earlier.
This trend highlights a deepening economic dependency between Moscow and Beijing.. While the People's Bank of China remains one of the world's leading sovereign gold buyers, Russia has transitioned from a fellow accumulator to a primary supplier of raw materials to the Chinese market, effectively trading its natural wealth for Chinese economic cooperation.
Why 75.6 tonnes of gold flowed to Russian retail buyers
The instability of the ruble has pushed Russian citizens to follow the lead of their central bank, albeit for different reasons. In 2024, Russian consumers purchased 75.6 tonnes of gold, which represents roughly 25% of the nation's total annual production.
This record-high domestic demand indicates a widespread lack of confidence in the national currency. As the Bank of Russia liquidates reserves to fund the state, private citizens are clamoring for physical gold to protect their personal savings from inflation and the volatility of a war-torn economy.
The $31.9 billion valuation drop in September
The financial volatility of Russia's reserves is evident in the recent valuation swings. As reported by Kitco News, Russia's remaining gold reserves were valued at approximately $301.6 billion at the end of September, a significant drop from the $333.5 billion valuation recorded just one month prior.
This nearly $32 billion decline raises critical questions about the transparency of Russia's remaining assets. It remains unclear how much of this drop is due to actual sales versus market fluctuations or accounting adjustments.. Furthermore, the source does not specify the exact mechanism the Bank of Russia is using to liquidate these holdings given the restrictive sanctions environment.
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