Why gold is the bright stuff for would-be sanctions busters
Bullion can be traded more easily beyond US oversight than dollars
Investment fundamentalists dismiss the yellow metal as yieldless and useless. The market disagrees. Gold is trading at $1,840, per troy ounce, close to record highs. The war in Ukraine has fostered heavy demand.
Just before Christmas, the World Gold Council, a UK-based industry body, estimated year-to-date cumulative purchasing in 2022 of 673 tons led by governments. That included 400 tons in the third quarter, a level described as “heroic” by Adrian Ash of BullionVault, a trading platform.
This contrasted with a figure of just 333 tons in the first nine months of 2022 reported by central banks to the IMF. Some of the discrepancy may be explained by differing sample groups and time periods. But it is hard to imagine that all of it is.
Moreover, in the 12 months to November, gold in British vaults — the biggest repository — fell by 500 tons, more than 5 per cent, according to LBMA data. At today’s price, those ingots were worth $30bn.
The inevitable inference is that nations challenged by the so-called “tyranny of the dollar” are quietly buying gold to replace foreign currency in reserves or for other purposes. Russia springs to mind: most of its government institutions, banks and bigwigs are covered by sanctions. China is also subject to a growing raft of trade curbs amid tensions over Taiwan.
“Coals to Newcastle,” sceptics say. China and Russia have plenty of gold from their own mines. Moreover, gold is a pretty clunky substitute for dollars, as Barry Eichengreen, a Berkeley economics professor pointed out in a recent report(opens a new window). He noted: “Shipping $1bn of gold would require six 20-foot trucks.”
ft.com |
