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Why gold is the bright stuff for would-be sanctions busters

Section: Daily Dispatches

A remarkably gold-friendly and LBMA-hostile commentary from the Financial Times.

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By Jonathan Guthrie
Financial Times, London
Monday, January 9, 2023

Experts joke that some Russian-mined gold in British vaults "is so old it has double-headed Imperial eagles stamped on it." Ownership shifted into non-Russian hands decades ago, they say. But investors are worried that Russian gold could be used for sanctions busting. The London Bullion Market Association is therefore registering it all.

The anxiety of investors is apt. Gold is the currency of fear and distrust. The financial systems of the democratic West and authoritarian East are pulling apart amid mutual recriminations. That extends the potential role of gold for national reserves and for transactions where no questions need be asked.

... Dispatch continues below ...


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Investment fundamentalists dismiss the yellow metal as yieldless and useless. The market disagrees. Gold is trading at $1,840, per troy ounce, close to record highs. The war in Ukraine has fostered heavy demand.

Just before Christmas, the World Gold Council, a UK-based industry body, estimated year-to-date cumulative purchasing in 2022 of 673 tons led by governments. That included 400 tons in the third quarter, a level described as "heroic" by Adrian Ash of Bullion Vault, a trading platform.

This contrasted with a figure of just 333 tons in the first nine months of 2022 reported by central banks to the IMF. Some of the discrepancy may be explained by differing sample groups and time periods. But it is hard to imagine that all of it is. ...

Gold can also be traded more easily beyond U.S. oversight than dollars. For unaligned states, dollar dealings too often touch New York's markets. They are also likely to feature the multinational banks through which American regulators achieve extraterritorial reach. ...

Sanctions enforcers should also take a close interest in the gold market in London. More than 9,000 tons of the metal, worth some $544 billion at current prices, sits in repositories within the M25 highway, more than in Fort Knox. The city has a history of embroilment in money laundering. Investors should be wary of the gold stored in London's secretive, subterranean vaults.

... For the remainder of the commentary:

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