Risk Management

05:57 PM
Connect Directly
Facebook
LinkedIn
RSS
E-Mail
50%
50%

Why is Russia Selling Gold?

The world's largest buyer of precious metals was also on the wrong side of the natural gas trade, while its economy, not well diversified, has continued to stall throughout 2013.

Should Gold investors be worried that the world’s largest buyer of the precious metal has started selling its position?

In September, the Russian government turned heads when it sold 12,000 ounces of Gold. A small number in absolute terms, but a decidedly negative change from the fierce buying spree of the last few years. Why is Russia selling?

Russia’s economic stalling has continued throughout 2013. With 58% of Russia’s economic output dependent on Oil and Natural Gas, the economy is not well diversified. The overall GDP growth was negative in the 2nd quarter, at -.26% growth rate. The unemployment also ticked up in September to 5.5% from 5.4% in August and overall investments in Russia hit their lowest reading since 2010.

The recent Natural Gas boom in the United States has created exciting notions of an energy self-sufficient country. However, the Russians have received the wrong end of the stick on the Natural Gas trade. Natural Gas prices have dropped by over 2/3’s since mid 2011. That happens to coincide with when Russia’s economy started leveling off from years of growth. Adding to the bad news has been the severe drop in Crude prices since the summer. Much fanfare has been attributed to the rise in Russia’s Gold mining industry, however this has proved to be a disastrous year for Gold prices and many mines were financed with extraction cost levels above $1500 per ounce. Furthermore Russia is the 5th largest global Silver producer, and Silver prices have been chopped by 1/3 in the last year. There are hopes that the Sochi Olympics will bring a needed economic boost to the country.

Alexander Fleiss serves as Chairman and Chief Investment Officer of Rebellion Research Partners LP, a Global Macro hedge fund and financial advisory that invests across all asset classes and is based in New York. Mr. Fleiss also oversees the firm's institutional research ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
New York FinTech Innovation Lab Calls for New Entrepreneurial Applicants
Wells Fargo joins 14 other major financial institutions providing mentoring and guidance to the six chosen startups.
Micro Data Challenges in an Era of Macroprudential Regulation
Research and statistical analysis experts at central banks are tasked with developing sophisticated forecasts and models to identify systemic risk. Yet they are spending most of their time acting as data entry clerks, rather than developing these models.
The Perks of 'SmartSourcing' Shared Services in Financial Industry
A breadth of vital but undifferentiated business processes are still being replicated across the industry. They are all candidates for centralization.
Managing Social Media Risk Strategy: Technology Can Only Go So Far
Advanced analytical technologies are an important part of a social media risk management strategy, an Accenture report says, but the technology must be balanced with training and procedures.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Inside Abel Noser's Trading Floor
Inside Abel Noser's Trading Floor
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.