Gold embargo will not hit Russia
The US government banned the import of gold from Russia. Earlier, about the intention to impose an embargo on the income of the G7 country, explaining this by the fact that gold is one of the major Russian export goods and annually imports tens of dollars into the country. Similar measures are included in the new EU package. Experts believe that the gold valuation certainly does not kill Russian gold mining and may even indirectly help Russia with the strengthening of the strengthened ruble.
An embargo on Russian gold has been announced from four seven G7 countries – the USA, Great Britain, Japan and Canada. The application pages are looking into this issue for now. It is known that distribution to new products will be limited. At the same time, the restrictive measure came as a bolt from the blue, as back in early March, the London competition of the precious metals market, which sets the standards for the gold market, suspended the Good Delivery status for Russian consumers.
Moscow responded to the impending embargo with restraint. According to the Deputy Head of the Presidential Administration of the Russian Federation – Press Secretary of the President of the Russian Federation Dmitry Peskov, “the market for precious metals is global, large, voluminous and quite diverse.” According to him, if one market “loses its attractiveness due to illegitimate decisions,” then there is a reorientation to other markets – “where there are more comfortable and more legitimate economic regimes.” The Union of Gold Producers of Russia refrained from commenting on the issue of the embargo.
According to the World Bank for Gold (WGC), in 2021 the leaders in gold mining in the world were China (370 tons), Australia (330 tons), Russia (about 300 tons), the USA (180 tons) and Canada (170 tons). About 90 percent of the gold mined in the Russian Federation is exported. A significant share falls on the UK, which is the world’s hub for gold trading. According to the British side, last year the import of Russian gold into the country amounted to $15.45 billion.
It is noteworthy that, despite the exclusion from the list of the London Precious Metals Market Association, in March of the year Switzerland imported 36 tons of gold, which, as expected, was mined in Russia, in May – another 3 tons. In reports from Russian sources, gold is denied. The Association of Manufacturers and Producers of Precious Metals (AFCMP) announced that none of its representatives have met recently. Also, the Swiss customs was quick to report that the gold arrived in the country from the UK. “In short, the parties to the arrival by appointment: “I am not me, and the horse is not mine.” In general, there is a slight suspicion that the “fun adventures” of gold are now starting around the world. Some global Cossack robbers,” the investment banker wrote in his Telegram channel Evgeny Kogan.
If we talk about the prospects for reorientation to other markets, then China, India and the United Arab Emirates (UAE) should be mentioned first of all.
– The UAE is a major gold trading center. From there, it diverges to different countries of the world, including India and China – the main consumption of gold on the planet. In 2021, demand for gold in India approached 800 tons, in China it exceeded 1.1 tons, an industrial expert told Octagon Leonid Khazanov.
“It is in the UAE, India and China that they will focus on increasing sales. True, local buyers are likely to agree to take it at a discount. Nevertheless, they are unlikely to refuse to purchase it.”
Leonid Khazanov
industrial expert
In general, according to his appointment, the usual G7 direct ban on gold imports from Russia was established under very tough scenarios, which may seem to drop its growth by 30–40 percent by the end of 2022 (to 200–230 tons) and reduce its exports by 20–20%. 30 percent.
At the same time, the loss of such volumes will inevitably affect world gold prices. Yevgeny Kogan believes that it will rise in price symbolically. According to Leonid Khazanov’s forecast, after the ban on work in the G7, world gold prices can soar sharply, reaching a level of 2 thousand troika in the coming week after the embargo was announced. For the western week of June, the price fluctuated in the range from 1.82 to 1.83 thousand . dollars). However, the expert says that “when the nervousness in the market ends, prices will creep down.”
– While not playing a supercritical role as consumers of gold, the G7 countries nevertheless play an important role as an infrastructure, because the foreign exchange transactions for gold trading take place through the UK and Switzerland. In this sense, there are certain risks for Russian companies. On the other hand, informal self-restrictions are already happening, the market is narrowing, they are adapting to this,” a source in the industry told the Octagon. According to his conclusion, as a result of the introduction of the embargo, pricing for the spread between domestic and federal markets can be obtained, as a result of which gold in Russia can be significantly cheaper than in the external market, which is unprofitable for manufacturing companies. True, even the calculation of the growth of domestic demand is not enough.
“Even at best, consumption was small, about 30 tons,” recalls Khazanov.
The Central Bank could become the savior of manufacturing companies if it agreed to buy gold from them at world prices.
According to Yevgeny Kogan, this is the idea of observation in monitoring the situation.
– Traditionally, in Russia, gold miners sold gold to banks, which transported it to the world market. This channel is closed. In addition, purchases of gold in the reserves of the Central Bank of waste could poison the ruble. So there are many advantages to this idea,” says Kogan.
As for the shares of Russian gold producers, according to BCS GM, Polyus is in a better position, since the share of its export revenue in 2021 was less than 2 percent. Polymetal generated about 12 percent of revenue from exports to the EU last year and 56 percent of all revenue from sales outside the Russian Federation. its main foreign market was Kazakhstan (35 percent of total revenue). “It is not yet clear how Kazakhstan reacts to the introduction by the G7 countries and the dangers of the EU. On the other hand, the effect can be observed due to the fact that the production of Polymetal is diversified with silver, ”the analysts say.