Russia, Kazakhstan Expand Gold Reserves as Central Banks Buy

Russia and Kazakhstan expanded their gold holdings in December, seeking to diversify their reserves as the metal capped a 12th annual advance and investors raised holdings to an all-time high.

Russian holdings climbed 2.1 percent to 957.8 metric tons in December, taking the increase over 2012 to 8.5 percent, according to data on the International Monetary Fund’s website. Kazakhstan’s hoard expanded 1.7 percent to 115.3 tons last month, and surged 41 percent over the year, the data showed.

Bullion has rallied as investors sought a haven from weaker currencies and potential inflation, with governments from the U.S. to Europe and Japan ramping up stimulus to promote faster growth. Gold holdings in exchange-traded products reached a record last month. Prices will rally this year and into 2014 on central banks’ stimulus measures, according to Morgan Stanley.

Central banks need to “diversify into gold as the euro zone is not yet out of the woods,” said Lynette Tan, a senior investment analyst at Phillip Futures Pte. in Singapore. “This will provide long-term support for gold prices.”

Gold for immediate delivery fell 0.1 percent to $1,657.57 an ounce at 1:26 p.m. in London. The price increased 7.1 percent last year, the smallest annual gain since 2008. The precious metal reached a record $1,921.15 in September 2011 as Europe’s debt crisis stoked speculation that the euro zone may fragment.

No Target

While the Russian central bank will continue buying gold, the pace of the purchases may vary, First Deputy Chairman Alexei Ulyukayev told reporters this month. There’s no 10 percent target for gold’s share in the reserves, Ulyukayev said.

Turkey’s holdings jumped 14.5 percent to 359.65 tons last month, according to the IMF data. The amount has increased due to it accepting gold in its reserve requirements from commercial banks. The Philippines’ gold reserves fell 1 percent in November from October, the figures showed.

Countries bought 373.9 tons in the first nine months of last year, according to the producer-funded World Gold Council, which said in November that full-year additions for 2012 would probably be at the “bottom end” of a range from 450 to 500 tons. Central banks purchased 456 tons in 2011.

Investor holdings in gold-backed ETPs rose 0.4 percent last month, reaching a record 2,632.5 tons on Dec. 20, according to data compiled by Bloomberg. This month, they’ve contracted 0.8 percent as spot gold fell 1.1 percent.

Gold will rally this year and into 2014 as U.S. Federal Reserve policy makers maintain asset purchases for two more years to buttress the recovery of the world’s largest economy, Morgan Stanley said in a report on Jan. 24. Prices will be supported by investment and central-bank buying, analysts Peter Richardson and Joel Crane wrote.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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