Central banks buy gold from local mines amid record prices

Central banks are increasingly looking to enhance their golden reserves. They turn into mines in the backyard of the source of the yellow metal.

Besides being cheaper, securing gold directly from mines helps support the local industry and reserves without studying on foreign drainage reserves.

While countries such as the Philippines and Ecuador do this for years, more central banks that can reach local gold mines have started, increased, or consider direct local purchases, according to the World Gold Council.

Nineteen out of 36 respondents in the World Gold Council The latest survey of the Central Bank They said they were buying gold directly from local and golden craftsman mines in the local currency. Four are thinking about following the example. This is a slightly higher number of a survey last year, when about 14 central banks out of 57 said they were buying directly from the local sources.

“One of the trends we see is that some central banks, especially in Africa, Latin America, have begun to buy gold directly from small domain gold mines, which have already spread due to the high price,” said Choukai, the global head of the central banks at WGC.

Central banks in Colombia, Tanzania, Ghana, Zambia, Mongolia and the Philippines are based on localized gold to build reserves, according to the Industry Authority.

Reuters reported that the Gold Council in Ghana – the state agency that manages the purchases of gold on behalf of Ghana Bank – in April, obtained agreements with many mining companies to buy 20 % of its golden production. Last September, the Mining Authority in Tanzania has imposed that all gold exporters, including miners and merchants, said Set aside at least 20 % of their production For sale to the central bank.

“You can offer an argument that it is cheaper than buying gold in the international market, because many of these central banks buy gold with a simple discount on the international price,” Van said.

Traditionally, central banks get gold through the global market that does not need a prescription-usually concentrated in London-where gold is treated through the banks of the main alloys, or their price in US dollar, euro, or sterling. These purchases in London are often highly connected or LGD, which meet global trading standards and are stored in the highest level of the highest level like those in the Bank of England.

Adrian Ash, research manager at Gold Investment Bullionvault, said due to the high price and attractiveness of gold as a hedge against geopolitical risks, it is natural that the central banks of producing countries turn into local production.

Gold prices were on a rupture, as it prevented its highest levels amid geopolitical uncertainty and Decreased confidence in other traditional safe havens. Gold spot Prices are currently trading at $ 3,328.3 an ounce, an increase of approximately 27 % so far. The purchase of local mining product is kept on banking and medium fees, as well as shipping costs.

However, countries need to pay the price of treatment and refinement of the metal to the LGD standard – the actual international standard for large gold bars. Ash said that these operations must be performed abroad if the country does not have a LGD refining locally, which will add costs.

Central banks that buy gold bars from local mines and have local LGD refining capacity, overlooking these additional costs. The Central Bank of the Philippines, for example, is an accredited LGD refinery. Kazakhstan has two approved mosques by the London Skin Market Association. Russia was seven until it was suspended in 2022 after the country invaded Ukraine. Others, such as Ghana and Zambia, may need dependence on external refining refineries, which compensates for part of the savings provided.

With high levels of global debt, commercial risks and geopolitical risks on cards, central banks want to enhance their temporary warehouses for the shield against sudden financial shocks. Keep more reserves – in multiple forms – It provides ammunition for potential crisis management.

Of the 73 central banks included in WGC, about 95 % said they expect their peers around the world raising gold reserves during the next year.

In the past, if these central banks want to buy gold, it is likely to buy them only in the international market. “But if you have local gold production in your country, many central banks are thinking, well, we may use this production of local gold instead and add reserves in this way.”

She said that the purchases of the Central Bank through international markets often provide leading bombing banks with greater confidence and reduce the reputable risk of central banks. Many gold that is purchased locally comes from craft and small gold mining-Asgm has been linked to weak work practices and environmental damage Illegal smuggling.

But it can also be said that the central banks, with their institutional credibility and financial weight, are in a good position to make the formal character to the supply chain and clean it, the WGC fan said.

He said: “Central banks can harness their huge purchasing power to do good for these young mines.”

Van said: “The presence of a widely reliable buyer like the Central Bank gives mines on a small scale a legal outlet and an outrage to sell gold,” Van said. “This not only turns flows away from criminal networks, but also improves tracking and accountability.”

“This is exactly what we described as-win.”