Russia Burns Gold Reserves at Fastest Pace in Two Decades as War Budget Strains Mount
Moscow liquidated 27.9 tonnes in four months—eroding a strategic cushion built over 20 years as sanctions and military spending force hard asset depletion.
Russia’s Central Bank liquidated 5.7 tonnes of gold in April 2026, dropping reserves to 2,298 tonnes—the lowest level since March 2022 and the sharpest four-month decline in 24 years, as widening budget deficits force Moscow to monetise strategic assets built up over two decades.
The April drawdown, confirmed by Kitco News citing Central Bank data, brings total sales since January to 27.9 tonnes—a pace unseen since 2002 when the CBR shed 41.5 tonnes in a single month. The depletion marks a strategic reversal: after accumulating 1,900 tonnes between 2002 and 2025 as a hedge against Western Sanctions, Russia has become a net seller, liquidating reserves even as gold trades above $4,800 per ounce.
Fiscal Pressure Drives Asset Burn
Russia’s federal budget deficit reached 5.88 trillion rubles ($78.9 billion) in the first four months of 2026—2.5% of GDP and 1.5 times the full-year target, per Trading Economics. Oil and gas revenues, historically Moscow’s fiscal backbone, collapsed 38.3% year-on-year to 2.3 trillion rubles as Western price caps and lost European markets bite, according to data published by Ukrainska Pravda.
Defence spending now absorbs 40% of the federal budget, surpassing social welfare allocations in March. Military and security outlays have more than doubled since 2021, forcing the Kremlin to drain both its National Wealth Fund—down from $113.5 billion in 2022 to $51.6 billion by end-2025—and Central Bank gold reserves. The dual drawdown leaves Moscow with fewer tools to defend the ruble or finance sanctions evasion as liquid currency reserves dwindle.
“Sales to finance the budget deficit may continue amid a sharp increase in government spending compared to budget targets.”
— Natalia Milchakova, Lead Analyst, Freedom Finance Global
From Accumulation to Liquidation
Moscow’s pivot to selling gold represents a structural shift. Between 2002 and 2025, Russia quintupled its reserves to become the world’s fifth-largest holder—a deliberate strategy to insulate the economy from dollar dependence and Western financial pressure. The Central Bank began net selling in late 2023 as sanctions froze an estimated $300 billion in foreign currency reserves and the budget deficit widened beyond sustainable levels.
Since 2022, Russia has liquidated a combined 15 trillion rubles (~$150 billion) in gold and foreign currency, with the pace accelerating sharply this year: 3.5 trillion rubles vanished in January–February 2026 alone. Gold trading volume on the Moscow Exchange surged 350% in March versus the prior year to 42.6 tonnes, while ruble-denominated trading jumped 500% to 534.4 billion rubles, data from the exchange shows.
Strategic Constraints Tighten
The depletion constrains Moscow’s policy options on multiple fronts. Gold reserves serve three functions: currency defence (selling bullion to buy rubles during crises), sanctions evasion (gold trades in parallel markets where Western restrictions are weaker), and fiscal backstop (liquidating to plug budget holes). Each tonne sold addresses immediate cash needs but erodes capacity for future crises.
Usable hard-currency reserves—excluding frozen Western holdings—now total an estimated $210–315 billion, far below the headline figure of $870 billion that includes inaccessible assets. The National Wealth Fund’s liquid portion, meanwhile, could be exhausted within 14 months at 2025 spending rates, analysts at the Odessa-based MMI research group warned last year. With the fund already down to $51.6 billion and military costs showing no signs of moderating, the timeline may have shortened further.
Russia produces over 300 tonnes of gold annually from domestic mines, but this output flows primarily to the Central Bank to replace liquidated reserves rather than adding to the strategic cushion. At current depletion rates, domestic production covers less than half the pace of official sales, meaning net reserves continue to fall even as miners operate at full capacity.
Market Dynamics and Currency Defence
The timing of Russia’s sales is significant. Gold prices have traded near all-time highs in 2026, with spot averaging around $4,800 per ounce—meaning each tonne sold yields roughly $154 million. The Central Bank sold 300,000 ounces in January above $5,500/oz, maximising revenue from the liquidation. Yet even at record prices, the inflows barely dent the deficit: April’s 5.7-tonne sale generated approximately $880 million, covering less than 3% of that month’s budgetary gap.
Analysts note that gold sales also undermine the ruble’s stability. “Currently, a number of central banks continue to sell gold due to the need to cover expenses, including defence costs, and also for rising energy prices and to support national currency exchange rates,” said Nikolai Dudchenko, analyst at Finam. The dual mandate—funding deficits while defending the currency—creates a policy bind where each sale weakens the very asset base needed for future interventions.
- Russia liquidated 27.9 tonnes of gold in four months—fastest pace since 2002—dropping reserves to 2,298 tonnes
- Budget deficit hit 5.88 trillion rubles (2.5% GDP) as oil/gas revenues fell 38.3% and defence spending reached 40% of federal budget
- National Wealth Fund liquid assets collapsed from $113.5B (2022) to $51.6B (2025); usable currency reserves now $210–315B vs $870B headline
- Each tonne sold at $4,800/oz generates $154M but erodes capacity for ruble defence and sanctions evasion
What to Watch
May’s reserve data, due in early June, will clarify whether April’s 5.7-tonne sale was an anomaly or the new baseline. If liquidation continues at the current pace, Russia will shed over 80 tonnes in 2026—equivalent to nearly 30% of its annual domestic production and three times the 2025 rate. The trajectory matters: sustained drawdowns signal that Moscow views gold as a near-term fiscal tool rather than a strategic reserve, effectively mortgaging long-term currency stability for short-term budget relief.
Also critical: whether Russia begins tapping its yuan reserves more aggressively. Gold and yuan holdings represent the Central Bank’s last liquid assets outside Western jurisdiction. A shift toward yuan liquidation would indicate gold reserves are approaching a floor the Kremlin deems untouchable—likely around 2,000 tonnes based on historical policy statements. That threshold, if breached, would leave Moscow with minimal hard assets to weather a ruble crisis or sudden sanctions escalation.
Finally, track the spread between official budget figures and actual expenditures. April’s deficit already exceeded the full-year target by 50%, yet off-budget Military Spending remains opaque. If classified outlays are running significantly higher than reported figures suggest, reserve depletion may accelerate beyond what current data capture—turning a concerning trend into a full liquidity crisis within 12–18 months.