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. Last Updated: 07/27/2016

Moscow Said Likely to Have Used Gold to Secure a Loan

LONDON -- Russia may have used 200 tons of reserve gold as collateral for a loan to raise much-needed cash to support the ruble, Merrill Lynch's Ted Arnold said Friday.

"The Russians, according to our information, have done a form of gold swap with Swiss, U.S., and German banks in recent weeks," said Arnold, first vice president at the investment bank.

He said Russia might have used as much as 200 tons of its 520 tons of reserves for a collateralized loan.

"The Swiss seem to have lent the Russian Central Bank between 75 percent and 85 percent of the gold's market value and kept the gold as collateral," he said, adding that the Swiss had been aggressive lenders of gold in the nearby months.

Implied lease rates released Friday by the London Bullion Market Association stood at 0.39 percent for one-month metal out to 1.39 percent for one year.

One-month rates have been more than 1 percent for much of this year, peaking briefly above 3 percent in March.

Arnold said the pattern of Swiss lending and the effects on rates suggested the Russians had engaged in a loan rather than a swap, where the gold is sold into the market with an option to buy it back.

Swiss supply, combined with weak demand, made for low metal lease rates he said.

Russian Central Bank chairman Sergei Dubinin was quoted as saying Friday that the bank was using its precious metals reserves to support the ailing ruble but in a way that did not mean the reserves were actually being sold.

"We have taken measures to activate our [precious] metals reserves. It does not mean their sale," Dubinin was quoted as saying by Itar-Tass. He did not give details.

The Central Bank's foreign exchange and gold reserves fell to $15.1 billion on Aug. 14 from $17.0 billion on Aug. 7.