European banditry against Russian assets continues
2022.12.21 02:00
European banditry against Russian assets continues
Budrigannews.com – In response to Moscow’s invasion of Ukraine, billions of dollars’ worth of gold of Russian origin have quietly changed hands in London, Zurich, and New York’s high-security bank vaults in recent months.
A total of $2.2 billion worth of Russian bullion was taken out of the accounts of 11 Western investment funds between July and November, according to data.
Due to disinvestment from bullion caused by rising interest rates, funds storing gold have decreased in recent months. Reuters’ data, on the other hand, show that Russian gold is being taken away at a significantly faster rate than from other nations.
Even though this represents a small portion of the total Russian gold held by wealth managers, it demonstrates a shift, as some funds have stated that they no longer wish to hold any assets connected to Russia.
Two sources at exchange-traded funds (ETFs) that hold hundreds of tonnes of gold have stated that they would like to sell Russian metal. One claimed that he had requested that the bank that was paid to store the gold in his fund allocate as little Russian metal to it as possible.
Many ETFs list the bars they own publicly, making them one of the largest holders of bullion. Because each bar bears the stamp of its origin, investors are able to determine whether they have Russian gold.
“Some clients click on the bar list and see a lot of Russia, which makes them wonder, ‘Whoa, what’s going on?,'” a source stated.
“Clarifying it for them is troublesome. The source continued, “We try to eliminate anything that would make them doubt that this is the right product. We want to make the barriers to entry (to the fund) as low as possible.”
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In the months after Russia attacked Ukraine, banks opposed demands from assets to eliminate Russian gold, dreading an auction that would upset the market.
An executive at one of the banks that stores gold for ETFs stated to Reuters on condition of anonymity, “We didn’t want a knee jerk sell-off of all the Russian metal.” This executive spoke to Reuters.
Regarding the removal of Russian gold, the executive stated, “It’s been phased in a controlled, business as usual manner.”
Gold produced in Russia prior to March 7, when Moscow began what it calls a “special military operation” in Ukraine, is exempt from Western sanctions unless it is owned by a sanctioned Russian individual or company. As a result, funds are not required to sell their holdings.
However, sanctions prevent funds from holding new gold from Russia, one of the world’s largest producers, which mines approximately 330 tons annually and is worth $19 billion at current prices.
According to two people who work at banks that store gold, some funds that publicly disclose the country of origin of their holdings are concerned that investors might not want them to hold Russian gold, whereas other gold owners who do not publish such information are less concerned.
According to the bankers, Russian gold that was taken out of these funds was frequently given to other owners who lived in the same area.
Bankers, analysts, and customs data indicate that some has been shipped to Asia, where demand has been strong in recent months.
In the first eleven months of the year, the London Bullion Market Association (LBMA) observed a decrease in the quantity of gold stored in vaults in London of 468 tonnes, or 5%. The data from British and Swiss customs show a lot of goods going to China, India, and other Asian and Middle Eastern nations.
The World Gold Council, which keeps track of the industry, says that between them, they held almost 2,300 tonnes of gold worth $130 billion stored in London, Zurich, and New York. This represented roughly two thirds of all the gold owned by ETFs worldwide.
JP Morgan, HSBC, and ICBC Standard manage most of the gold in ETFs.
ICBC Standard is the smallest of the eleven Reuters-tracking funds, holding approximately 100 tonnes of gold. However, it has moved the fastest, decreasing Russian gold in those funds by 47 percent and increasing non-Russian gold by 16 percent since mid-July.
Since July, HSBC has reduced the amount of Russian gold and non-Russian gold in their accounts by 20% and 10%, respectively, for the tracked funds, which store around 1,100 tonnes of gold.
JP Morgan reduced its holdings of approximately 1,050 tonnes of gold for the funds by 13% for Russian gold and 9% for non-Russian gold.
None of the three banks would comment.
Since July, eight of the funds had reduced the proportion of Russian gold in their holdings, while two, managed by Amundi and WisdomTree, had eliminated all Russian gold altogether.
Both WisdomTree and Amundi did not respond to inquiries for clarification.
Since July, the aggregate sum of Russian metal in the 11 assets has fallen 19%, while non-Russian gold has diminished 9%.
On the other hand, BlackRock (NYSE:) and ‘s iShares Gold Trust and the SPDR Gold Shares of the World Gold Council (NYSE:), actually increased the amount of Russian gold they owned.
The London Bullion Market Association, according to the WGC, established the guidelines by which pre-war Russian gold can be traded. BlackRock did not respond.
Russian bullion made up 7% of the 11 funds at the end of November, down from 7.8% in the middle of July.
A market where all bars have traditionally been equal is further fragmented by the withdrawal of Russian gold from some ETFs.
Some funds are already only carrying newer gold bars, which they claim are sourced more ethically than older ones.
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However, because ETFs typically draw metal from the wider market and must take eligible gold even if it is Russian, few large funds anticipate being able to reliably claim to be free of Russian gold anytime soon.
The executive in charge of the ETF stated, “In theory, they could come to us with 100% Russian bars, and we would have to accept them.”
“It’s a long excursion. There won’t be any Russian gold anywhere in the near future, in my opinion.
