By Rhod Mackenzie
The movement of Russian gold has suddenly changed direction. Instead of going to London, Russian precious metals are flowing to Asian markets where demand remains consistently high. What are reasons for this redistribution and change of direction, who currently requires gold and why, and how will demand change this year?.
Russia is turning to the East.
The global gold market is a dynamic and rapidly changing industry. The participants in the market sell precious metals in the West and buy them in the East, depending on their goals and preferences. Over the past two years, Russian gold flows that previously went to London have shifted to the East following the London Bullion Market Association (LBMA) announcement of its ban on Russian gold in the summer of 2022.
Statistics confirm this new geography of supplies changes. The import of Russian gold to Hong Kong in 2023 increased by almost six times, reaching $5.5 billion. Its share of the local market has almost quadrupled.
Until 2022, London was the primary hub for trading Russian gold, with over 80% of all exports going there. However, after the conflict in Ukraine, the West imposed sanctions, and supplies to the UK ceased. The United Arab Emirates took its place as the main importer, with Dubai importing 96.4 tons of Russian gold in 2022, while Hong Kong only imported 16 tons.
Since the start of last year, the UAE has reduced its transactions with Russian metal due to Western pressure, while Hong Kong has increased them. According to Maxim Kuznetsov, co-chairman of the Association for Promoting the Turn to the East (ASPV), up to 69 tons passed through Hong Kong from January to September 2023.
This trend is also observed in London and other locations.
Over the year, China, which holds a special position, increased its gold purchases by 1.6 times, mainly from Switzerland and the Emirates. These volumes are not only for domestic consumption, as gold from Hong Kong is distributed worldwide. While there is no exact information on the destinations of supplies from customs, it is evident that the primary importers are India, Turkey, the UAE, and mainland China.
Kuznetsov emphasises that the final aspect is the most crucial. Hong Kong serves primarily as a trading platform that facilitates financial connections between mainland China and the rest of the world. The People’s Bank of China is one of the world’s largest purchasers of gold, including Russian gold.
Meanwhile, mainland China does not directly account for a significant portion of Russia’s supplies. However, Chinese residents have been purchasing precious metals more actively than any other population in the world for at least the past decade. In the last year alone, they bought 959.2 tons, which is ten times more than what Russians purchased. It is unclear what percentage of this volume comes from Russian supplies.
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Russian gold flows to the East
By Rhod Mackenzie The movement of Russian gold has suddenly changed direction. Instead of going to London, Russian precious metals are flowing to Asian…