The following news story gives the reasons. Today Tass News reported a significant increase in Russian Gold buying for its next fiscal month. This could trigger the biggest seasonal rush into Gold ever.
Exhibit 1: Russia Announces Gold Purchases September 4th
Russia is set to invest $1.9 billion in foreign currency and gold purchases between September 6 and October 4, according to the country's Finance Ministry. This initiative will see a daily allocation of 8.2 billion rubles, or roughly $92 million.
The move reflects Russia’s ongoing efforts to strengthen its financial reserves and hedge against global economic uncertainties, particularly through increased gold acquisitions.
In total, the ministry will allocate 172.9 billion rubles ($1.9 billion) under Russia's fiscal rule. The purchases will run over the next month, with consistent daily transactions.
See also - Russia selling oil for gold in September
For context, in the previous period from August 7 to September 5, the Ministry had earmarked 24.65 billion rubles for similar purchases, with daily buying set at 1.12 billion rubles.
The increase is significant on multiple levels, not the least of which is the coming BRICS summit hosted by Russia this year from October 20th to Oct 22nd. See: BRICS Gold (and Silver!) Launch Date is October 2024 for more
Other coincident factors include the largest short portion held by Bullion Bank swap dealers of all time which ostensibly makes the banks vulnerable to rallies in Gold Price.
Exhibit 2: Western Bullion Banks Have Never Been Shorter Gold
Over the past six years, September has consistently been the worst-performing month for gold, showing an average decline of around 3%.
This seasonal downturn is often attributed to a combination of factors, including reduced demand following summer buying sprees, profit-taking by investors, and market adjustments ahead of year-end fiscal policies.
Historically, many traders use this period to sell off gold holdings, driving prices down.
Despite the metal’s long-term allure as a safe-haven asset, September has proven to be a challenging month, making it a "sell season" for gold according to Bloomberg.
See Bloomberg: Sell Season Started, What it Means for more.
Exhibit 3: Gold’s Worst Month historically is September
Source: Bloomberg
This monumental increase in Russia’s gold buying also coincides with rising geopolitical tensions and economic uncertainty globally.
With ongoing Western sanctions and the increasing focus on de-dollarization among BRICS nations, Russia’s move to ramp up its gold reserves could be seen as a strategic hedge. Additionally, with the US Federal Reserve signaling potential rate hikes, the global appetite for gold may strengthen, driving up demand.
As central banks around the world continue to pivot towards gold, Russia’s aggressive purchases might serve as a catalyst for a new wave of gold acquisition among its BRICS allies. This announcement, if fulfilled will certainly have an effect on the price of gold headed into the BRICS event as well as the runup to the US Presidential election. If the historical storm between September and October is weathered, it could be Gold’s biggest “Buy Season” ever.
Related Read - 601% Increase: Russia Unleashes Unmatched Gold Buying Spree