/ world today news/ The Russian gold mining industry set a record: it sold five times more gold to Hong Kong. China’s official figures for purchases of Russian gold are significantly lower. Experts believe that Beijing is trying to hide from the West that it is buying so much gold. Why?
Gold shipments from Russia to Hong Kong reached a record for the last 11 years – 5.31 billion dollars since the beginning of the year. Thus, the supply of Russian gold increased by 625.8%, or five times. In October, they increased by 527% – to 987.6 million dollars. This is data from the Census and Statistics Department of the Hong Kong government.
Previously, London was the main buyer of Russian gold. Thus, in 2021, Great Britain bought 266.1 tons of gold from Russia, in second place was Kazakhstan, where only eight tons were sent, noted Yevgeny Mironyuk, an exchange expert, referring to data from the Federal Customs Service. However, in the summer of 2022, Western countries introduced a ban on the purchase of Russian gold. And Russia found new markets in Asia and the Middle East.
“Gold exports have traditionally been one of the important sources of foreign currency inflows to Russia: the volume of Russian gold exports in 2021 amounted to $15.5 billion. In order not to lose such an important source of income, the authorities decided to redirect the gold flows to those countries that can help implement it. Hong Kong is a connecting center between Asia and the Western world, which has all the necessary exchange infrastructure,” notes Alexander Potavin, analyst.
Curiously, official Chinese data shows that since the beginning of the year, China has bought only twice as much gold from Russia as it did a year earlier, amounting to just $330 million.
“Through Hong Kong, there are ‘grey’ purchases of gold from China, which apparently does not fully disclose its gold reserves. It also buys gold directly through the Shanghai Stock Exchange, which also saw record gold turnover. China is trying to hide that it is increasing its gold reserves so as not to alarm the Western public. At the same time, Beijing is reducing the share of US government bonds in its reserves. China is afraid that its independent policy or the escalation of the situation around Taiwan could lead to the West blocking its reserves, just like Russia’s,” says Alexei Vyazovsky, vice president of the company “Zolotaya Plata”.
There is another version being discussed in the market as to why China is buying so much physical gold.
“Perhaps China is preparing to return gold to its yuan, which requires the accumulation of large amounts of gold.” I have my doubts about this version because world trade is so complex and so large that moving bullion to balance the trade deficit is problematic and expensive. Insurance and security costs are added,” the expert believes.
Russia, by the way, after many years of increasing its gold reserves, stopped doing so this year. Vyazovsky explains this by saying that the authorities do not want to fuel inflation by splashing rubles on the market while buying gold. Russia is already struggling with inflation: The central bank is raising interest rates and the authorities have imposed obligations on exporters to sell the proceeds.
In addition to Hong Kong, Dubai and Turkey also became major buyers of Russian gold.
“Dubai buys Russian gold for resale. Most likely the UAE is casting our bars, rebranding them and then selling them. This gold can go to Europe itself,” says Vyazovski. “If in 2021 Russia exported 1.3 tons of gold to the UAE, then after the imposition of sanctions in 2022, the UAE imported 75.7 tons of Russian gold worth $4.3 billion,” notes Potavin.
And the third country that gladly buys Russian gold is Turkey. There is a discount for Russian gold, but it is not public, adds the expert.
As a result, despite the sanctions, Russian gold mining companies managed to adapt to the new conditions, find new markets and continue to make money.
“Our gold mining companies are straight up in chocolate. They get double profit. On the one hand, they save costs due to the fact that the ruble is falling, and they earn more due to the rise in the price of an ounce in dollars. The currencies of friendly countries are still pegged to the dollar,” says Vyazovsky.
Meanwhile, gold crossed the psychologically important threshold of $2,000 per ounce and approached the all-time record of $2,069 per ounce, which was set in August 2020. The price of gold on the New York Comex Exchange reached $2,013.4 per troy ounce.
“Gold has already breached the psychologically important $2,000 level five times in the past year and a half, approaching the record but not breaking it.” Analysts attribute this to price manipulation by the so-called gold pool of transnational banks and central banks of the largest advanced economies. They prevent gold from appreciating by selling it at the right time. This is done so that gold does not become an alternative to the dollar and does not compete with it. Western countries have no interest in returning China or other countries to the gold standard,” says Alexey Vyazovsky. Therefore, it is difficult to say when a new historical record will be set, as this is not a market situation, adds the expert.
On the one hand, the risks of the world sinking into another recession have decreased. It was they who helped to increase the price of gold, which is considered a safe asset in such crisis situations. However, new risks have emerged. Vyazovsky highlights two pieces of news that could lead to a rise in gold prices and a new all-time high. First, there is the threat of stopping the passage of tankers through the straits, in particular the Hormuz. Second – the possible collapse of the largest bank in Switzerland, UBS, which saved another large Swiss bank, Credit Suisse, by buying it.
“Apparently some of the toxic assets were included in the purchase. Now default insurance is skyrocketing, setting historic records, and there are already reports that the bank has stopped withdrawing money from customers. This is a potentially explosive story. If one of the biggest banks in the world collapses, there will be a real storm in the financial markets. And then gold will break the historical record, despite all the manipulations,” concludes Alexey Vyazovsky.
“According to our calculations, gold prices in 2024 may rise to about $2,200 per ounce, that is, against the background of a weak dollar, the price of the precious metal will reach new historical highs,” says Potavin.
Translation: V. Sergeev
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