The Central Bank of Russia announced that they will buy 30 tonnes of gold from Gokhran, the state depository. The Central Bank is following trends from China, India, Sri Lanka, Mauritas and other central banks who are hungrily purchasing gold. Many central banks are fearful of the dollar’s continuing plunge and are retreating into the safe haven gold has offered for centuries as a store of value. The sale will not take place on the open market, but the publicity of the deal adds more price support for gold as other large institutions may follow suit and also decide to buy gold.

Russia had planned to sell 20 to 50 tonnes of gold this year, but someone from the Kremlin leaked the information early and the nation has decided to hold its reserves. Such a large influx of supply into the market, if announced, could cause a drop in the price of gold, and thus Russia would not be able to profit as much as they planned (the gains realized could have been $1.7 billion). There is also much anticipation that the spot price of gold will rise and greater returns will be realized is the bullion is sold later.

Russia has a pattern of strategically selling off bullion reserves for the largest possible profit. The delays in export of palladium from the nation in 2000 caused a panic in the demand for the bullion and drove up the price of palladium to an all time high of $1100 an ounce in early 2001.

Similarly, between 1999 and 2002, Chancellor Gordon Brown sold off 400 tonnes of the UK’s gold bullion when the price was at a 20 year low. He announced the venture, first, and the market dropped. Brown still proceeded with the sale, perhaps an embarrassing lapse of judgment considering how high gold is sitting today. The potential revenue loss was £2 billion.

After hush hush talks to ditch the dollar for a basket of currencies between Russia, China, France, and the Arab states was reported in the Independent a few weeks ago, and subsequently denied by representatives of some of those governments, the Tehran Times is reporting that Iran’s wishes are no secret. The Trade Promotion Organization of Iran (TPOI) announced last week that it will drop the dollar from then nation’s foreign exchange reserves. TPOI also encouraged Japan to follow their lead with the dollar, beginning by purchasing their oil with yen instead of dollars. TPOI reports that in the last two years Iran has sold 85% of oil to currencies that are not the dollar, and they plan to not use the dollar for the remaining 15% either. Historically gold’s performance is tied to the value of the dollar. News like this will only reinforce the record climbs gold has made the last several years.