Russia has become one of the world's largest sellers of gold over the past 12 months, a move aimed at raising cash to address budget deficits, though analysts say it is not necessarily a sign of an impending financial crisis.
The Russian Central Bank announced that its gold reserves stood at 73.4 million troy ounces, or 2,282 metric tons, as of the start of July. This represents a decline of around 43.5 metric tons since the beginning of 2026, bringing reserves to their lowest level since before the full-scale invasion of Ukraine in February 2022.
Gold prices hit record highs earlier this year, averaging around $4,800 (€4,210) per ounce in the first four months before falling to around $4,000 per ounce. Moscow's sell-off is estimated to have raised more than $5 billion.
"The fact that they're selling gold means that they're running out of other more liquid assets," Elina Ribakova, an economist at the Peterson Institute for International Economics, told DW. "So there is pressure on the deficit and also pressure on the sources to finance this deficit."
Russia's budget has been under serious strain due to massively increased defense spending, which funds the war in Ukraine. The Financial Times reported that the finance ministry warned the cabinet that overspending on the war would be at least $28 billion in 2026, with further overspends expected in 2027 and 2028. Defense spending has more than quadrupled since 2021, totaling around 16 trillion rubles ($204 billion) in 2025.
Chris Weafer, a Moscow-based financial analyst with Macro-Advisory, says the gold sell-off is significant but not panic selling. "It's an extraordinary situation, but it's a relatively normal trend," he told DW. "It doesn't represent any element of Russia going broke, running out of money, not having anything else and literally selling the household silver."
He notes that the gold was mostly sold by the finance ministry via the National Welfare Fund (NWF), rather than the Central Bank. Since early 2022, gold became one of the few assets the NWF could buy, as US Treasuries and other Western assets were unavailable due to sanctions. The fund's gold sale is intended to replenish its liquid assets, which Weafer estimates at around $50 billion out of a total fund value of $150 billion.
"The Kremlin doesn't want that buffer to go down because that would lead to maybe more speculation about financial crisis or economic difficulties, and it would undermine the Kremlin's geopolitical position," said Weafer. "It likes to portray the country as being very stable and very strong, and that $50 billion of cash is an important part of that."
Another factor is that Russia, as one of the world's largest gold producers, can replenish sold stocks relatively quickly by buying from domestic producers. Russia holds the fifth-largest reserves globally, similar to China, France, and Italy, but significantly behind Germany and the US.
Ribakova agrees this provides a buffer. "Russia has an advantage," she said. "It does produce gold itself. So when it was worried about sanctions, it allocated part of the money into gold purchases from domestic producers."
The gold sell-off raises questions about Russia's budget deficit and wider economic stability. Federal budget spending and deficit could exceed official plans by more than 1 trillion rubles ($12.85 billion) in 2026, according to recent government data. The deficit is projected at 1.6% of GDP for 2026, approximately $40 billion, and could grow.
However, improved oil and gas revenues, boosted by higher oil prices due to the war in Iran, have helped Moscow offset budget difficulties so far in 2026. Ribakova says everything hinges on oil and gas revenues, calling it the "real limit" on Moscow's capacity to finance the war in Ukraine.
"Everything hinges on that," she noted. "When the oil price is high, Russia gets revenues. It's easier to borrow, its domestic financial system is healthier. If the oil price drops, say, to sixty or forty, then you immediately have a crisis."
Both analysts caution that despite economic difficulties, Russia can continue funding the war for the foreseeable future by cutting non-defense spending. "Putin can continue going for years in the current environment," said Ribakova. "Maybe not making any progress on the front line, but still being able to throw resources at the war with Ukraine."
"Even if the deficit continues as is, Russia can still find the money and really won't be in any sort of a financial crisis or a weak geopolitical position over the next 12 to 24 months," said Weafer. Yet he points to obvious longer-term damage to the economy and potential trouble ahead.
"It is creating this huge distortion in the economy and creating this longer-term negative picture that's now creating divisions in government," he said. He added that there is a divide between those responsible for economic growth and the Kremlin, with their message being that the current approach cannot be sustained "if you want the economy to go back to a more normal trajectory after peace. That's the bottom line."
Source: www.dw.com