::::::::::::::::: OXUS GOLD 2005 :::::::::::::::::

Bank of Russia Will Re-Evaluate Gold Reserve

Yesterday, Bank of Russia announced that starting from January 1, 2006 it will re-evaluate the gold in the country reserve according to market prices. This decision was explain by the “necessity of aligning the published data with current market realities.” However, it looks like in reality the Central Bank (CB) is getting ready to buy massive amounts of gold, and the market prices will allow the bank to avoid accounting mistakes.
Yesterday Central Bank announced that from Jan.1 of next year it changes appraisals for the gold, which is kept in national gold reserves. Instead of previous fixed prices, the CB will start to appraise the precious metal according its own quotes, which are close to the market price. Officially, the CB proclaimed that this re-evaluation is necessary “to align the published data with current market realities.”

For the first glance, it looks logical—currently the gold in state coffers is appraised by the CB fro $300 per ounce. The same quotes were in the market in 2002. Since that time, the price for gold went up by 1.7 times. For instance, yesterday prices for the gold on world market were $520 - $524 per ounce.

The CB decision might also have different motivation. During his recent visit of Magadan, Russian President Vladimir Putin announced: “I think Central Bank should pay more attention to precious metal on Russian Federation’s territory when it is forming gold and currency reserve.” Besides, not long before this presidential remark, the CB officials headed by Chairman Sergey Igantiev, were saying about possibility to increase gold’s share in gold and currency reserve. These statements even caused gold price fluctuation on world market.

However, if the bank really is going to buy gold for the reserve this measure is justified. With such significant difference between purchasing price and the cost reflected in accounting books, there will be unavoidable serious mistakes in reporting documents. And this is not going to satisfy CB or its auditors.

by Dmitry Ladygin

Russian Article as of Dec. 14, 2005 Kommersant.