Silver to become part of Russian foreign reserves

In times of dwindling silver reserves and increasing uncertainty regarding future supplies, Russia has acted strategically and now wants to add silver to its reserves. This became clear in the Russian central bank’s recently published plans for managing its currency reserves.

While most Western central banks only report gold reserves, Russia and the former Soviet Union also have and had considerable reserves of platinum and palladium. During the Cold War, the exact size of Russia’s palladium reserves had the status of a state secret because Russia largely controlled the production of this precious metal and sought to control its price on the world markets.

The fact that silver will now also be part of Russia’s currency reserves is new, but fits in well with this picture, as Russia’s announcement takes more of an already scarce commodity off the table, thereby exacerbating existing shortages. At the same time, it is to be expected that the central bank’s new silver reserves will soon show book profits.

Russia already pays its bills in gold

Both will strengthen the rouble at a time when inflation in the country is high and the exchange of goods with other countries is very difficult due to Western sanctions. The move is also likely to exert additional pressure on the US dollar. In trade with other BRICS countries, Russia has already switched to making payments in gold in recent months.

For example, drone deliveries from Iran were paid for in gold and some transactions with Chinese trading partners were also settled in gold rather than US dollars. The Russian central bank’s efforts to further expand its gold reserves were correspondingly high.

It was relatively easy for the country to expand its own gold reserves because Russia is one of the leading gold producers and gold production could be bought up domestically for roubles. The situation is similar for silver, as Russia is the eighth largest silver producer in the world with an annual production of about 38.5 million ounces.

If some of this silver disappears into the vaults of the Russian central bank in the future, it will no longer be available to the industry. This is not insignificant, as global demand for silver has outstripped supply for four years in a row.

Although silver is already significantly more expensive than a year ago at prices of around USD 34, analysts are forecasting that the price could rise by a further 50% within a year. Sustained demand from industry has laid the foundations for a perfect storm in recent years. Russia could now fuel this further with its decision to add silver to its currency reserves.

Just in time for the start of the week, the resistance level of USD 32 was also significantly exceeded on Monday. A rally developed, causing silver to rise by a further two US dollars to the USD 34 range within a few hours. The strong rise within a short time shows on the one hand how much pressure the kettle has already been under in recent days and also indicates that imbalances on the futures exchanges are being eliminated in a rush.