As Russia Dumped Its Treasuries, Here's What It Was Buying

Last week, we were the first to report that Russia has all but fully liquidated its US Treasury holdings through the months of April and May.

In those two months, Russia sold a whopping $81 billion in Treasurys, a liquidation flow that was likely responsible for much if not all the blow out in rates over the period.

In 2010, Russia was among the top 10 holders of US Treasuries at $176.3 billion. With its holdings falling to $14.9 billion in May, the country is now below the $30 billion threshold for inclusion on the Treasury Department’s monthly report of major holders. On Tuesday, the Treasury released a list of 33 countries which includes the biggest holder China to the smallest Chile. Russia is no longer on the list.

However, that left two questions - why was Russia dumping USTs and what will do with all the funds it garnered from liquidating US debt instruments?

The head of the Central Bank of Russia (CBR) Elvira Nabiullina explained that the slashing of the holdings was result of the systematic assessment of all kinds of risks, including financial, economic and geopolitical.

Meanwhile, Russia’s gold holdings have been steadily increasing - for 39 straight months - bringing its share of the precious metal to its highest level in nearly two decades.

Russia’s gold holdings in May grew by one percent to 62 million troy ounces, worth $80.5 billion, according to the CBR.

According to Nabiullina, gold purchases helped to diversify reserves.

Global geopolitical conflicts along with trade tensions triggered by the US earlier this year have made some countries follow suit. Turkey nearly halved its US Treasury holdings from almost $62 billion in November to $32.6 billion in May. Germany has reduced its holdings from $86 billion in April to $78.3 billion in May.

And while Russia and others were busily buying physical gold, speculators were unwinding their net long positions to the lowest since January 2016.

But, Hedge funds and other large speculators raised their bets on gold-price declines to the highest since at least 2006 in the week to July 17, according to government data.

While bullion rallied on Friday, the massive surge in leverage money short positions is potentially the catalyst to support the usual seasonal pattern in gold prices...

Especially if Trump keeps jawboning the dollar lower.

 

Comments

FBaggins powow Tue, 07/24/2018 - 11:39 Permalink

But why has gold gone up disproportionately three or four times as much as silver over the last 30 or 40 years? Silver has more industrial uses than gold as a precious metal. Has silver become relatively more plentiful than silver and easier to produce over the years, or is it being held down? Or is the price of gold inflated? 

In reply to by powow

Nunyadambizness FBaggins Tue, 07/24/2018 - 12:27 Permalink

There has been a LOT of financial manipulations over the past 10+ years.  BOTH silver and gold are UNDER priced, though Silver is by FAR.  The worst part is, everyone KNOWS about it and nobody has done shit to stop it.  TPTB don't want the rest of us to know what's happening.

Historically the price of silver was about 1/16th the ounce of gold (of course there were variations, but that was about the average)--so one ounce of gold bought 16 of silver.  Now, the ratio is 1/79 (as of today).  There will be a correction, and I hope it comes soon--regardless, if the price was to adjust to the historic average, silver would be at $76.56 an ounce as of today.  

In reply to by FBaggins

BigJim FBaggins Tue, 07/24/2018 - 21:12 Permalink

Silver started losing ground to gold in the 19th century as it was demonetized by more and more countries.

While half of all silver produced every year is "consumed", that means half (~ half a billion ounces) is hoarded every year.

There are quite literally billions of above-ground ounces of investment-grade silver waiting to be dishoarded when the the price rises.

Although it's impossible to manipulate prices for genuine, non-cartelised commodities (things like wheat and corn) for long, PM prices can be manipulated by destroying investors' belief that they are safe havens. So, for instance, by driving the prices lower temporarily before some major geopolitical event, investors are put off owning them in the first place, reducing demand.

I own a shitload of silver and really, really wish I didn't. Hopefully, the banksters will drive up the prices like the did in 2011 and I can unload it at something approaching a profit.

Silver. What a fucking dog.

Yes, if gold is re-monetised, maybe silver will come back. Don't hold your breath.

In reply to by FBaggins

ShorTed Justin Case Tue, 07/24/2018 - 11:31 Permalink

I'm still trying to figure out how, if Russia really was buying gold, the price dropped from 1350 to 1240?  I mean, you can see the move in the Treasury price/yield very clearly.

So this article is positing that Russia sale of treasuries is enough to negatively impact the largest, most liquid market on the planet, but their purchases of gold caused the price to go down?

..something here doesn't make any sense.

In reply to by Justin Case

tenpanhandle ShorTed Tue, 07/24/2018 - 11:59 Permalink

Gold derivatives (contracts, ETF shares etc.) are a diabolical scheme.  When people are pouring into them instead of physical, price is dampened because demand is satiated with the fake gold.  Then when they are dumped on the market, price is dampened as well because supply, albeit fake, is increased.

This article is a red herring anyway.  If you look at amount of treasuries dumped and amount of gold bought, by Russia, just a tiny percent went to gold purchase.  This is second such BS article that I have recently seen, here on ZH, that alludes to the same thing; that Russia dumped its treasuries and bought gold.  Maybe the same recycled article???

None the less - click bait bull shit to excite us gold stackers.

 

Edit:  remember, 1 million ounces of gold equals about 1.25 billion dollars.

In reply to by ShorTed

Carl Spackler Whoa Dammit Tue, 07/24/2018 - 10:30 Permalink

Whoa Dammit...

(((They))) are doomed. This move by Russia is another sign of such. 

Russia liquidated US Treasuries as preparation for the global currency reset in which the USA and Russia move to asset-backed currencies and away from the petro dollar system.

USA and Russia are energy rich, so they are no longer bound to (((them))) financially, via the KSA and OPEC.

In reply to by Whoa Dammit

SRV Whoa Dammit Tue, 07/24/2018 - 11:33 Permalink

The 1yr (not 10) COT in gold clearly shows the Bullion banks with a rock bottom short position... gold will be higher over the next 2 months (until they reach a limit... when specs stop adding to longs.

But, until 'they' decide otherwise, $1350 is the top of their well established 5 year channel ($1200 bottom), so they sell shorts to the specs and we start again... so you can make some money in long/short trading... investing is dead until JPM decides to cash in on huge bullion positions.

In reply to by Whoa Dammit

Singelguy Adolfsteinbergovitch Tue, 07/24/2018 - 04:33 Permalink

That is overly simplistic. The appropriate time to buy gold is highly dependent on the currency you are using to buy the gold. In USD terms, I would suggest that in the short to medium term, gold prices will decline, while in euro terms, they are likely to rise. If you are buying gold with any emerging market currency, now is a VERY appropriate time to buy.

In reply to by Adolfsteinbergovitch

any_mouse Singelguy Tue, 07/24/2018 - 04:56 Permalink

Arbitrage. The current retail rate between USD and emerging market currencies? Then there is the retail premium over spot for metal.

Parasites. A little here, a little there, spread over a billion hosts.

The overhead for their multi million to billion dollar trades is minimal. Helps that they also own the exchanges and banks.

The con depends on one accepting Their false value system as your own.

It does not make the Parasites neither happy nor satisfied.

The Rothschild heir marries a common slut and a mental case, who ends up hanging from a doorknob. [the new nail gun?] Does he have self esteem issues?

In reply to by Singelguy

PitBullsRule Adolfsteinbergovitch Tue, 07/24/2018 - 09:57 Permalink

Putin likes gold because it concentrates his wealth.

When you own 200 Billion, your problem is how to get it all in one spot that you can watch over and guard. Gold allows him to get some of it concentrated in one spot.

It would be better if the Russian people had some of the wealth and could start businesses, do research, grow food, and become wealthy.

Instead, Putin has a vault full of gold bricks, and everybody else suffers miserably.

Thats Russia.

In reply to by Adolfsteinbergovitch

SpanishGoop Tue, 07/24/2018 - 04:19 Permalink

"why was Russia dumping USTs and what will do with all the funds it garnered from liquidating US debt instruments? "

 

Buy or create US destruction instruments ?

 

SoDamnMad Tue, 07/24/2018 - 04:24 Permalink

Russia has spent a fortune on the Ketch Strait dual bridge project to Crimea. It also funded construction for all the World Cup stadiums as well as recently building the city of Sochi for the Olympics.  Add in project around the huge country and THEN fund the military expenditures in Donbass/Lugansk as well as Syria plus all the weapons acquisitions.  Russia has funded apartments all around the country for the army, navy and air force families as well as lots of subway expansion around Moscow and other cities.  Big bucks. it has to come from somewhere to keep the military and the people of 12 time zones happy.