Russia's central bank said on Sunday that it would start buying gold on the domestic market again, in the latest move to try to stabilize the financial markets and its reserves after Western sanctions targeted its banking system.
The central bank of Russia came under Western sanctions over the weekend, after the EU, the U.S., and allies decided to remove some Russian banks from the international SWIFT banking system and imposed restrictions on the Russian central bank in response to Russia's war in Ukraine.
"This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally. Second, we commit to imposing restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions," the European Commission said on Saturday.
Scrambling to contain a massive collapse in the Russian ruble and a bank run that already started in the weekend, the central bank of Russia now resumes buying gold after a two-year pause. Russia, which has the fifth-largest gold reserves in the world, stopped buying gold at the start of the pandemic when gold prices soared with investors seeking safe havens when equity and oil markets were collapsing.
Russia's renewed buying of gold is set to further support gold prices, which have already risen by 6 percent this year. Early on Monday, spot gold increased by 1.1 percent to $1,909.16 per ounce and were on track to post their best month since May 2021.
Gold prices are likely to surpass the $2,000 per troy ounce price in the coming months, Goldman Sachs said on Sunday. Goldman has a $2,150/ounce price target on gold.
"Gold's unique role as the currency of last resort will likely be apparent if restrictions on Russia's central bank accessing its offshore reserves leave it leveraging its large domestic gold stockpiles to continue foreign trade, most likely with China," Goldman's analysts said.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More