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Russian finance minister raises gold sales again

Section: Daily Dispatches

By Nataliya Vasilyeva
Associated Press
via Yahoo News
Wednesday, October 28, 2009

MOSCOW -- Finance Minister Alexei Kudrin said Wednesday that Russia is considering selling gold on world markets to cash in on high prices as the government faces its first budget deficit in a decade.

Kudrin's remarks follow a report last week that the Gokhran precious metals depository was planning to sell up to 50 metric tons, or 1.6 million ounces, of gold in London by the end of the year.

With gold prices reaching record highs of over $1,000 per ounce, the sale could bring Russia some $1.7 billion.

The finance minister gave no details Wednesday in remarks to journalists carried by state news agencies.

"We will continue to study this issue and the decision may come in the next few days," Kudrin was quoted by the ITAR-TASS news agency as saying.

The head of the state diamond and precious metals exporter said Tuesday that no sale was planned this year, in what analysts described as an attempt to prevent expectations of a major sale from affecting the market price.

Russia is running a budget deficit of 7.7 percent of gross domestic product -- its first in a decade -- and expects a 6.8 percent deficit next year.

The government spent 300 billion rubles ($10.3 billion) from its rainy-day reserve fund in September alone, running it down to 2.3 trillion rubles ($78.7 billion), which is not enough to cover next year's budget deficit of 2.9 trillion rubles.

Russia's gold and foreign currency reserves -- the world's third-largest -- stood at $423.4 billion as of Oct. 16, according to the central ank. The gold reserves have risen 14 percent this year, to 19 million troy ounces, worth nearly $19 billion.

The Russian government -- a major holder of U.S. dollars -- has spoken strongly in favor of diversifying its reserves but has done little to follow through.

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