Russia is likely to step up its gold production in the next couple of years amid increasing risks of more US sanctions that could push the Russian Central Bank to boost the existing precious metal reserves, as follows from a Fitch Solutions report cited by CNBC.
The potential economic restrictions will “paradoxically” support the gold market in the country, the report said.
“The rising risk of Russian state banks being frozen out of dealing in US dollar-denominated assets all together as bi-lateral relations remain strained is pushing the Russian central bank to increase its holdings of gold. As long as tensions with the US remain, domestic demand for gold is set to remain”, it explicitly stated.
The latter partially accounted for the Russian Central Bank’s move to shore up gold bullion, which is considered to be a safe haven during economically tumultuous times.
In April, the Central Bank announced that it was halting purchases of gold. The financial watchdog’s head, Elvira Nabiullina, explained the move, arguing that Russia, currently one of the top gold producers, is now more interested in larger-scale exports in light of greater demand across the world for the precious metal.
According to Fitch Solutions, in the longer run, a “healthy” pipeline of new mining projects could propel Russia to the top spot as the world’s largest gold producer by 2029.
The research agency forecast that Russia’s gold output would spike from 11.3 million ounces this year to 15.5 million in the next nine years, with the average annual growth projected to amount to 3.7%.
Conversely, China’s production, the world’s largest for the time being, is expected to stay more or less where it is between 2020 and 2029, with an average annual growth not surpassing 0.2%, Fitch Solutions noted.
“This marks a notable slowdown compared with the average annual growth of 3.1% over the previous 10-year period”, the agency said, suggesting that China's gold output has been challenged by a number of factors, such as strict environmental regulations and closures of smaller mines, as well as falling ore grades.