It seems that Russia has just attempted to strike another blow against the greenback.
The country announced this week it will completely remove all US dollar assets from its National Wealth Fund (NWF) and add gold to it for the first time on record.
The NFW is Russia’s so-called rainy-day fund which accumulates the country's oil revenue and was initially designed to support the pension system. As of May 1, it was worth $185.9 billion (01/02/22: $174,9 billion).
Putting its money where its mouth is (so to speak), the fund will add a 20% gold holding to its existing assets, and update its fiat currency holdings to 40% in euros and 30% in yuan. Japanese yen and British pound will make up 5% each.
The move comes as part of a broader strategy outlined by Putin to “de-dollarize” the Russian economy.
In our SPOTLIGHT #64, we explained how Russia’s Central Bank is accumulating the yellow precious metal which now surpasses the Central Bank’s US dollar reserve.
And we asked the question:
Are we slowly seeing an erosion in the US dollar dominance?
Well, Russia's answer could be summed up by what Sergey Naryshkin, the head of Moscow’s Foreign Intelligence Service, said last June:
“It seems bewildering that the US continues to be the holder of the main reserve currency while behaving so aggressively and unpredictably. The monopoly position of the dollar in international economic relations has become anachronistic. Gradually, the dollar is becoming toxic.”
Russia’s position on the dollar seems, in part, to be trying to kick the American currency while it's down, at least symbolically.
As for gold, Russia’s decision to hedge 20% of the NWF’s assets with the yellow metal only reaffirms gold’s momentum and its importance as a strategic asset.