Data from eleven investment funds showed that from July to November, Russian gold bars totaling $2.2 billion at current exchange rates disappeared from their accounts.
Over the past few months, the number of funds investing in gold has dropped sharply. Bullion sales are driven by rising interest rates in the world’s largest economies. However, data compiled by Archyde.com shows that Russian gold is being disposed of much faster than gold from other countries.
In general, asset managers hold a small fraction of asset managers’ Russian-origin gold, but this trend reflects global change, with some funds saying they don’t want to own Russian-related assets.
Two sources in exchange-traded funds (ETFs) holding hundreds of tons of gold said they would like to get rid of the Russian-origin metal. One of them said he asked the bank where he holds assets to give him as little Russian metal as possible.
ETFs are among the largest bullion holders, and many of them publicly publish a list of the bullion they own. Each is stamped with its provenance, so investors know if they have Russian gold.
“Some customers open the list of bars, see a lot of Russia and ask, ‘What’s going on?’ It’s hard to explain to them. We want to make barriers to entry (to the fund) as low as possible, and we try to remove anything that will make them doubt that this is the right product, ”added the source.
Everything is as usual
After the outbreak of the Russian-Ukrainian conflict, banks resisted requests from funds to remove Russian gold, fearing a sell-off that would destroy the market.
“We didn’t want a sharp sell-off of all Russian metal,” said the head of one of the banks holding gold for the ETF, who spoke to Archyde.com on condition of anonymity.
“The process took place gradually, in a controlled manner, as usual,” he added.
The funds are not required to sell their assets because gold produced in Russia prior to March 7 is not subject to Western sanctions against Moscow unless it is owned by a Russian individual or entity under sanctions.
However, sanctions prevent funds from holding new gold from Russia, which mines about 330 tons a year and is one of the world’s largest producers of this metal.
Two employees of banks that hold gold said some funds that publicly disclose the origin of their gold are concerned about investor reactions to the Russian metal. Those who do not publish such data do not worry much.
Russian gold withdrawn from such funds was often transferred to other owners in the same location, the bankers added.
However, some of the gold has gone to Asia, where demand has been strong in recent months. This information is confirmed by the data of bankers, analysts and customs services.
The amount of gold in vaults in London, tracked by the London Bullion Market Association (LBMA), fell by 468 tons, or 5%, in the first 11 months of this year. British and Swiss customs data show huge shipments to China, India and other countries in Asia and the Middle East.
golden streams
Archyde.com analyzed the assets of the eleven largest ETFs.
According to the World Gold Council, which oversees the segment, at the end of November they were holding almost 2,300 tons of gold worth $130 billion in London, Zurich and New York, about two-thirds of all ETF-owned gold in the world. Most of the gold held in ETFs is managed by JP Morgan (JPM. N), HSBC (HSBA. L), and ICBC Standard.
ICBC Standard holds about 100 tons of gold for eleven funds monitored by Archyde.com. Since mid-July, the amount of Russian gold has decreased by 47%, while gold of other origin has increased by 16%. HSBC, which held about 1,100 tons of gold for monitored funds, has reduced the share of Russian gold in its accounts by 20% since July; volumes of gold of other origin decreased by 10%. JP Morgan, which held about 1,050 tons of gold for funds, cut Russian gold by 13% and non-Russian gold by 9%.
Of the funds, eight have reduced the proportion of Russian gold in their holdings since July, and two, managed by Amundi and WisdomTree, have shed all Russian gold. Since July, the total volume of Russian metal in 11 funds has fallen by 19%, and non-Russian gold – by 9%.
However, the two largest funds, BlackRock iShares Gold Trust and World Gold Council’s SPDR Gold Shares, have actually increased their share of Russian gold. The WGC said its funds were guided by rules set by the London Bullion Market Association that pre-conflict Russian gold could be traded. BlackRock declined to comment.
Russian gold in ETF
Source: Archyde.com
At the end of November, 7% of the bars in 11 funds were Russian, compared to 7.8% in mid-July.
The departure of some ETFs from Russian gold further fragments the market, where traditionally all bars were equal. Some funds already hold only new gold bars, which they say are mined more responsibly than older ones.
But not many large funds hope that they will be able to say with certainty that they do not have Russian gold anytime soon. ETFs usually take metal from the general market and must accept eligible gold, even if it is Russian, although they may subsequently require it to be excluded.
“Theoretically, they could come to us with 100% Russian bullion, and we would have to accept them,” the head of the ETF said. “It’s a long way. I do not expect Russian gold to completely disappear from the funds in the near future.”
Prepared by Profinance.ru by materials Archyde.com agencies
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