Russia Faces Limits to Its Yuan Strategy as Gold Offers a Different Alternative

Russia’s difficulties using China’s yuan show that moving away from the US dollar requires more than choosing another currency. Gold offers a way to diversify reserves without relying on another government’s promise to pay, but it cannot readily replace the banking and payment networks needed for everyday trade.

Bloomberg’s latest reporting describes Russia’s effort to substitute yuan for dollars as faltering under US secondary sanctions. An accessible excerpt attributed to Bloomberg puts the yuan’s share of Russian export receipts at 22%, roughly half its mid-2024 peak, citing Russian central-bank data.

That measure concerns the currency used to receive export payments. It does not establish the yuan’s share of Russia’s reserves, imports, or all financial transactions. Nor does it show that gold is replacing the lost yuan share.

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A currency switch cannot remove banking constraints

Trade settlement requires banks willing to process payments, provide liquidity and finance transactions. Using yuan changes the currency involved, but does not automatically remove the sanctions exposure faced by participating institutions.

The distinction is particularly important for secondary sanctions, which can affect third-country institutions dealing with sanctioned parties. A payment currency may be available in principle while the banks needed to move it remain reluctant to participate.

A Bank of Finland analysis of yuan internationalisation describes Russia’s reliance on Chinese payment infrastructure and its shift toward yuan and gold in reserve management. Replacing dollar dependence can therefore introduce reliance on a different jurisdiction’s institutions and financial rules.

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Gold addresses reserve risk rather than every payment need

Physical gold held directly is not a deposit at a foreign commercial bank or a bond issued by another government. That makes it useful for reserve diversification, particularly when authorities worry about access to foreign financial assets.

Our guide to why central banks buy gold explains this role. It helps answer why gold may appeal to countries seeking less dependence on any single currency, rather than simply substituting yuan exposure for dollar exposure.

The Bank of Russia’s summary of its work in 2025 states that it retained access to yuan assets, gold bars, and foreign cash stored in Russia while some foreign-currency assets remained frozen. It also described yuan as playing a key role in its assets. Those statements provide context, rather than proof of a newly announced move from yuan into gold.

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Gold still needs a usable route to market

Owning bullion and spending it internationally are different activities. Turning bars into an import payment may require a buyer, an acceptable custodian or refiner, transport, insurance and a banking transaction in the currency the supplier accepts.

Sanctions and compliance restrictions can affect those participants too. Holding metal domestically can reduce foreign custody exposure, but it does not guarantee unrestricted access to international buyers or payment channels.

Gold also offers no interest income and fluctuates in value. It can diversify a reserve portfolio without providing the same convenience as cash or the same income as a government bond.

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Russia has also been drawing down gold

The evidence does not support a simple story of Russia responding to yuan problems by buying more bullion. Kitco reported on 21 October that Russian holdings fell by 200,000 troy ounces in September, equivalent to approximately 6.2 tonnes, to 72.8 million ounces.

Separately, the Bank of Russia’s monthly reserve table values gold at about $292.0 billion at the end of October, down from $301.6 billion in September. Those dollar values cannot establish the quantity bought or sold because market-price changes also affect valuations.

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What this means for gold buyers

Demand for assets outside foreign banking systems can strengthen gold’s strategic appeal. It does not establish that gold will displace the dollar in trade or guarantee an immediate price rise.

Investors following current gold prices must also consider competing returns and currencies. Our guide to how interest rates affect gold prices explains why tighter financial conditions can pressure bullion even when reserve diversification remains attractive.

Russia’s experience strengthens the case for distinguishing reserve protection from payment convenience. Gold can serve the former purpose, while the latter still depends on institutions willing and able to transact. Evidence of a new Russian buying programme would be needed before describing it as the next stage of Moscow’s currency strategy.