As the war with Ukraine drags on, Russia, facing fiscal pressure, carried out a large-scale gold sale to secure liquidity.
According to the World Gold Council (WGC) on the 24th (local time), Russia put about 15 tons (t) of gold on the market in January–February this year. This is the largest amount since 2002.
Russia's latest gold sale is seen as the last means of liquidation chosen amid Western countries freezing about $300 billion of Russia's overseas asset.
In the past, internal transactions between the Finance Ministry and the Central Bank were the norm, but recently gold has been sold directly on the open market. This is interpreted as a step to partly fill the fiscal gap caused by the war in Ukraine.
As a result, Russia's gold holdings fell to 74.3 million ounces, the lowest level since March 2022.
Not only Russia but also selling by other countries' Central Banks, including Poland and Türkiye, has continued, putting downward pressure on international gold prices. International gold prices fell to around $4,386 per ounce, plunging more than 17% in a month.
The decline in gold prices is analyzed to reflect a mix of economic factors in addition to the geopolitical crisis. The interpretation is that expectations are strengthening for a prolonged high-interest-rate stance due to rising international oil prices from Iran's blockade of the Strait of Hormuz and concerns about inflation.
Profit-taking after prices surged 65% over the past year is also cited as one cause of the correction.
Bloomberg reported, "In recent years, gold prices have moved similarly to emerging market stock returns, which is the exact opposite of the notion of a safe asset," adding, "If the Iran war is prolonged, the trend of a strong dollar and weak gold is likely to continue."