Russia's Prime Minister Vladimir Putin holds an ingot of gold as he visits the precious metals safe vault of the Central Bank in Moscow January 24, 2011. REUTERS/Alexsey Druginyn Yesterday, a fund manager friend sent me a chart containing a conundrum. It has two lines. One shows the gold price over the last two years, and the other the CRB metals index. The CRB is down by 30%. The gold price has fallen by a third of that. He asked me why I thought that was. The answer might be partly the same as it usually is when gold moves separately to other metals, I thought. It has safe-haven characteristics, and so when markets are volatile, investors (such as those on the MoneyWeek staff!) buy.

Look more closely, said my friend. It isn’t private or institutional investors buying. It is Russia. Russia’s total reserves in US dollars have fallen recently (as you’d expect given the oil price collapse), but its holdings of gold are up by 30% since 2014. Russia now holds as many ounces of gold as the gold exchange-traded funds (ETFs) do. In June alone, it added 800,000 ounces – the equivalent of some 12% of global annual gold mine production according to seekingalpha.com. That’s a lot of gold – and a buying speed that looks ambitious given the implosion in the oil price.

So, two questions for readers. First, what happens to the gold price in the short term if Russia stops buying? That’s a rhetorical one. But second – and to this I don’t really know the answer – why is Russia dumping its other reserves for gold?

A quick answer might be that it felt it had to sell Treasuries in the face of Western sanctions last year – as South Africa did in the face of anti-apartheid sanctions. But that’s not enough of an answer – Russia bought gold in huge volumes before the threat of sanctions and has kept buying even as that threat has retreated.

Another answer is that it is attempting to support the local mining industry by keeping demand up (producers aren’t allowed to export directly – they have to sell to the banks, who can then sell on to foreign buyers and the central bank).

Or maybe it is just that, like most other central banks, whatever it might or might not say in public, Russia remains convinced that gold is the best form of money there is, and the one on which some future system will be based. Note that far from wanting to wind purchases down, the Russian central bank has said that it intends to increase its reserves to $500bn worth – that’s double what it holds at the moment.

Finally (and I hope this isn’t much of a part of the answer), maybe Russia is thinking of doing something that will bring the threat of sanctions back. Either way, it is something to watch.