The Central Bank of the Russian Federation, located on Neglinnaya Street, Moscow.

The Russian central bank has reported this week that its gold bullion holdings surpassed the value of its US dollar reserves. According to the Moscow Times, Russia's gold as of June 30th last year was worth $128.5 billion – almost $4 billion more in value than the US dollars the Eurasian state holds in its reserves.

For trading security, the Russian central bank generally publishes figures publicly on a six-month delay, but as of January 8th Russia Today (a state-sponsored news organisation) reported that Russia's holdings were overall worth $597.4 billion.

Interestingly, Russia's largest holding is the Euro, with more than $165 billion in reserve, but even those holdings as a percentage have shrunk – and it's the same story for the Chinese yuan. The change is a positive step in the mind of Russian officials though, who have spent around two decades slowly shifting away from Dollar-heavy reserves to other assets, such as gold.

With the Covid-19 pandemic, Russia – like many other countries – has stopped buying gold while handling lockdowns and a diminished economy. Elvira Nabiullina, Head of the Central Bank of the Russian Federation, said last summer that she was 'satisfied' with the country's gold reserves, but given the forecasts for gold to make similar gains in percentage terms in 2021 and for the next few years, it's doubtful that Russia and others will simply ignore precious metals as an asset class.

Given the Covid-19 pandemic has weakened the US dollar and boosted gold prices, gold surpassing the US dollar isn't a huge surprise for many watching the bullion markets, but it's the achievement that's the point of it. According to statistics from the International Monetary Fund, an estimated 60% of bank reserves globally are in US dollar denomination, and similarly 40% of the world's debt is in USD. For a nation the size of Russia, and with so many neighbouring countries and trading partners, to switch from the USD to gold means two things: 1) a dislike of the dollar and 2) an appreciation of gold.

The dislike of the dollar is actually more than just unhappiness with the currency. It's Russia's dislike of America, and the dollar is the loser in the equation. In 2011, President Putin famously launched multiple verbal attacks on the USA. Speaking to Chinese state TV, Putin said: “America is being parasitic with the dollar’s monopoly position. I didn’t say that it’s a parasite on the world economy.” Putin also said similar when speaking at a summer camp for a pro-Kremlin youth group, telling youngster that America is “living beyond their means”.

Ultimately this milestone is only the beginning – for Russia and others who wish to have less to do with America and the dollar (particularly nations under sanction). With the world economy in dire straits as part of both Boom and Bust but also the coronavirus impact, the need to print money and to improve liquidity and keep money moving round the system is paramount. This inevitably will devalue currency and drive inflation. Gold does well against inflation, and central bank experts know this. Consumer demand is still sky high, and if the central banks pick up where they left off with their purchases then investors could see another surge in price akin to last summer.