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Russia liquidating US debt holdings, investing in gold

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Russia's Central Bank is liquidating its share of US Treasury bonds. (File photo)

Russia’s Central Bank has persistently sold off its US Treasury bonds and trying to bring down the share of Russian investments in American debt to near zero, reaching merely $14 billion in August from the 2011 high of $180 billion

“Russia has almost dropped out of the list of holders of US government debt, being the 54th largest holder,” said Timur Nigmatullin, a broker with Moscow-based Otkritie Bank, one of Russia’s largest commercial banks, as quoted in a RIA Novosti report on Thursday.

“A further sale of US Treasury bonds by Russia will most likely be compensated by buying gold and opening short-term deposits at banks,” he further explained, noting that the reason for liquidating its investments in US debt is not merely due to political differences and Washington-led sanctions on Moscow, but also due to rising interest rates by the US Federal Reserve, which makes American bonds cheaper.

This is while the share of precious metals in Russia’s foreign reserves has reached a record 18 percent, nearly approaching the share of its dollar investments, according to the report.

The reason for holding money in US bonds is global trade, economic analysts said as cited in the report, arguing that countries are forced to have plenty of American dollars in cash, and investing in US bonds is the best option toward that end.

Meanwhile, two largest investors in US debt, China and Japan, have also slashed their holdings, with Beijing’s holdings sinking to $1.165 trillion in August, from $1.171 trillion in July -- marking the third consecutive month of declines.

Tokyo’s holdings of US securities were also cut to $1.029 trillion in August, the lowest since October 2011, according to the report.

India and Turkey, it added, have also followed Russia's lead. While Turkey has dropped out of the top-30 list of holders of US debt, India has been liquidating its investment for the fifth consecutive months to $140 billion in August.

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