Central banks buy gold in local mines amid record prices

Central banks are increasingly trying to strengthen their gold. And they turn to the mines in their yard to get yellow metal.

In addition to the cheaper, the provision of gold directly from the mines helps to support the local industry and reinforce the stocks without weighing on foreign reserves, experts said.

While countries such as the Philippines and Ecuador have been engaged in this over the years, more central banks with access to home gold mines have begun, direct local purchases are increasing, the World Council of Gold reports.

Nineteen of 36 respondents at World Gold Council Last Survey of the Central Bank They said they buy gold directly at home artisanal and small miners in local currency. Four think about the next suit. This is a slightly higher figure than last year when about 14 central banks have stated that they were buying directly from domestic sources.

“One of the trends we see is that some central banks, especially in Africa, Latin America, start buying gold directly from home, small gold mines that really spread due to a higher price,” Shaooka, head of the Central Banks at WGC.

According to the branch body, the central banks of Colombia, Tanzania, Ghana, Zambia, Mongolia and the Philippines are based on the production of gold to create stocks.

Ghana Gold Board is a state agency that manages the procurement of gold on behalf of the Ghana Bank – in April fixed agreements with several mining companies on buying 20% of its gold, Reuters reports. Last September, as reported Set aside at least 20% of their results sell the central bank.

“You can argue that it is cheaper than buying gold in the international market because many of these central banks buy gold with a weak discount for an international price,” said Fan.

Traditionally, central banks acquire gold through the global market without a prescription-generally in London, where gold is carried out through large banks, at the price of US dollars, euros or sterling. These purchases often include London -delivery with high cleanliness or LGD that meet global trade standards and are stored in higher level repositories, such as in the Bank of England.

From the stunning prices for gold and its attractiveness as a hedge against geopolitical risks, it is natural that the central banks of the countries of the producers turn to domestic production, said Adrian Ash, Director of Gold Investment Bullionva.

Gold prices were on a tear, scaleing fresh highs against the background of geopolitical uncertainty and By reducing confidence in other traditional safe shelter. A place of gold Prices are currently trading at $ 3,328.3 per ounce, which is almost 27%today, LSEG data has shown. Buying out of the internal mine saves on banking and intermediaries, as well as delivery costs.

However, countries should pay for the processing and refinement of metal to the LGD Standard – in fact an international landmark for large gold bars. These processes should be done abroad if there is no domestic LGD processing in the country, which will add costs, Ash said.

Central banks that buy gold bars from local mines and have internal power for LGD processing, cancel these additional costs. For example, the Central Bank of the Philippines is a certified NGD. Kazakhstan has two refineries accredited by the London Bull market. In Russia, there were seven until they were rejected in 2022 after the country broke into Ukraine. Others, such as Ghana and Zambia, may need to count on external refineries, offsetting some advanced savings.

With the growth of the world level of debt, trade and geopolitical risks on the cards, the central banks want to strengthen their backup buffers to enclose from sudden financial upheavals. Holding more stocks – in several forms – Provides ammunition to control potential crises.

Of the 73 Central Banks surveyed by WGC, about 95% stated that next year they expect peers around the world.

In the past, when these central banks wanted to buy gold, they probably just bought it in the international market, the fan explained. “But if you have local gold production in your country, many central banks think, well, we can use this local production of gold and add stocks in this way,” he added.

Central bank purchases in international markets often offer greater trust through leading bullion and minimize reputational risks for central banks, she said. A considerable part of the gold acquired inside the country comes from artisanal and fine gold-asgm mining has been associated with poor work practice, environmental damage and smuggling.

But it can also be argued that the central banks with their institutional authority and financial weight are in a good position to formalize and clean this supply chain, the WGC supporter said.

“Central banks can use their great purchasing power to benefit these artisanal, small miners,” he said.

“The availability of a reliable, large-scale buyer, like the Central Bank, gives small miners a legal and fair outlet for sale of gold,” said Fan. “It not only distracts the flows from criminal networks, but also improves trashing and accountability.”

“That’s exactly how we describe it as well.”