The Russian Central Bank (CBR) has confirmed a significant shift in its financial strategy, announcing that it has begun selling physical gold from its reserves directly into the domestic market. This move mirrors previous transactions involving the Ministry of Finance's National Wealth Fund (NWF) and is primarily aimed at covering widening state budget deficits and supporting the Russian Ruble amidst ongoing international sanctions.
The decision comes at a time when global gold prices have reached historical highs, fueled by geopolitical uncertainty, central bank demand for diversification, and expectations of interest rate cuts by the U.S. Federal Reserve.
The Scale of the Sale and the Reason
For the first time, the CBR is conducting real sales of physical gold, which previously were largely 'on-paper' transfers between the Finance Ministry and the Central Bank.
- Depleting Reserves: Since the full-scale invasion of Ukraine in 2022, the liquid assets in Russia's NWF have been rapidly depleted. The gold holdings in the fund have fallen by approximately 57%, from 405.7 tonnes to 173.1 tonnes as of November 1, 2025.
- Wartime Financing: This sale is a direct measure to monetize assets that can bypass Western sanctions and inject foreign currency (or ruble equivalent) into the domestic market to maintain fiscal stability and fund war-related expenditures. Analysts predict Russia's total gold sales could reach around $30 billion (approximately 230 tonnes) in 2025.
- Supporting the Ruble: The Central Bank states the action is also designed to spread pressure across markets and maintain diversification, easing pressure on its Chinese Yuan holdings.
Will Gold Prices Fall? The Global Impact Analysis
The key question for global investors is whether a large seller like Russia releasing massive quantities of gold will depress international prices.
- Bearish Pressure: In principle, any large, unscheduled supply injection into the global market exerts bearish pressure and can cause prices to fall. The magnitude of Russia's planned sales (potentially hundreds of tonnes) is substantial.
- Geopolitical Offset: However, the current gold market is supported by powerful structural forces that are likely to absorb the Russian sales without a massive price collapse:
- Record Central Bank Demand: Global central banks, including those in BRICS+ nations, continue to purchase gold at near-record levels to diversify away from the US Dollar, a trend intensified by the freezing of Russian assets. This institutional demand acts as a strong price floor.
- Geopolitical Haven Demand: Gold's role as a safe-haven asset remains elevated due to the ongoing Russia-Ukraine conflict, tensions in the Middle East, and increasing global economic volatility.
- Rate Cut Expectations: Expectations that the U.S. Federal Reserve will cut interest rates in the coming months make non-yielding assets like gold more attractive, providing strong momentum for the rally.
While the large-scale sales by Russia will provide a short-term liquidity injection and may cap the immediate upside potential for gold, most global analysts believe the overwhelming forces of central bank buying and geopolitical uncertainty will prevent a significant, sustained decline. Gold is expected to continue trading in a high range, with long-term forecasts remaining bullish, projecting prices potentially reaching $4,200 to $5,000 per ounce in 2026.
