Given the crisis in Ukraine and deteriorating ties with the West, Russia has been aggressively accumulating gold reserves.

The IMF, in its recently released International Financial Statistics report, showed that the Russian central bank has hiked its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June. 

Indeed, most central banks are increasing their gold reserves, IMF data showed. Russia, Mexico, Kazakhstan, Kyrgyzstan, Tajikistan, Serbia, Greece and Equador have all reported higher gold reserves for June.

Between Q1 2009 to Q1 2014, Russia’s gold reserves almost doubled to 1,040.71 tonnes, while India’s central bank increased its gold reserves 56% to 557 tonnes. China’s central bank, on the other hand, increased its gold reserves 75% to 1,054 tonnes when it last stated official reserves in 2009, data showed. It is widely believed that China has accumulated larger – possibly much larger – reserves since.

The global meltdown of 2008 sparked off the current race to buy gold.

While 2012 was the strongest year of central banks buying gold in half a century, in mid 2013, the part withdrawal of fiscal stimulus and a reduction in the risk on environment saw prices collapsing in the gold market to as low as $1,200 an ounce from a peak of about $1,800 an ounce of a year ago.

Contrary to expectations almost none of the central banks liquidated part of their gold stock. If anything, they continued to buy up more gold along with investing in stocks as part of their asset diversification.

By the end of 2013, global central banks were estimated to hold 30,500 tonnes of gold, which is about one fifth of all the gold ever mined.

Apart from Russia, Turkey and Mexico central banks, those of Philippines, Kazakhstan, South Korea, and Indonesia were some of the biggest buyers of physical gold in 2013, data showed.

In the first half of 2014, these purchases accounted for 113 tonnes of the overall gold bought in the world, with central banks from Russia, Iraq and Kazakhstan in the lead.

Incidentally, even as the US is talking of an economic turnaround, central banks around the world are viewing the news with a jaundiced eye. That is because while the Federal Reserve talks of an interest rate hike to curb inflation, the European Central Bank is working at keeping its interest rate low, on the other hand.

Analysts point out that in addition to such contradictory signals, there are other upheavals around the world which are set to continue to add to the uncertainties in the bullion market.

The Russia-Ukraine rebellion, the Israel-Gaza war, the crisis in Iraq – central banks do not think this is the time to stop buying gold. What is also supporting the sentiment is that haven buying has boosted gold demand.