The state repository will sell 30 metric tons of gold worth $1 billion to the Central Bank next week, a source at the body said Friday, keeping the metal inside Russia after rethinking a plan to sell it on the market.
Central banks worldwide are building up their gold reserves as the metal trades near record highs. Gokhran, the repository, canceled plans to sell the gold on the open market after information about the sale leaked.
“The primary aim is to make sure this gold doesn’t hit the market and influence prices,” said Olga Okuneva, metals and mining analyst at Deutsche Bank. “It’s also a way for the Central Bank to diversify more into gold.”
Russia had planned to sell between 20 and 50 metric tons on the open market to help plug a budget deficit incurred during its first recession in a decade. The economy has since shown some signs of early recovery, in line with a rebound in oil prices.
With gold trading at record highs of $1,226.10 per ounce last week, boosted by a weaker dollar, analysts said Russia would be reluctant to sell the metal abroad or to push prices down by releasing a large quantity to the market.
Thirty metric tons, or 964,522 ounces, is equivalent to 16 percent of Russia’s gold production last year or up to 1.25 percent of global consumption of the metal.
The source at Gokhran, speaking on condition of anonymity, said President Dmitry Medvedev signed a decree on Dec. 7 approving the sale. “Next week, I think, we will conclude everything,” the source said.
Finance Minister Alexei Kudrin first announced the sale Nov. 18, saying Gokhran — which falls under his ministry’s watch — would sell at market price and use some of the proceeds to buy diamonds from state-run miner Alrosa.
Kudrin said Friday that the sale would take place by the end of the year. He gave no more details.
Russia holds the world’s third-largest gold and foreign exchange reserves — $451.2 billion as of Dec. 4. It is also the world’s fifth-largest gold miner, ranking between Australia and Peru, with an 8 percent share of global production.
The Central Bank held 19.5 million ounces of gold, or more than $20 billion worth, in its reserves as of Nov. 1.
Gold prices hit a four-week low of $1,109.10 an ounce Friday.
Upbeat U.S. economic data, highlighted by worries over sovereign debt in Spain and Greece, also boosted the safe-haven dollar and diminished gold’s appeal as an inflation hedge.
In the past, gold has served as a safe haven in times of economic crisis. However, spot bullion is now trading more than $100 below its record high $1,226.10 reached on Dec. 3, because of liquidation. Year to date, gold has still gained 27 percent.