MOSCOW, March 15, Natalya Dembinskaya. World central banks have been actively stocking up on gold throughout the past year, increasing its share in reserves and displacing the dollar. But there are fewer and fewer people willing to store bullion in the West — there is no trust after the freezing of Russian assets and attempts to confiscate them. No one has a guarantee that they will not do the same to him. Central banks are hastily returning the precious metal home, because there were times when they simply didn’t want to give away someone else’s.
Closer to home
Demand for gold in 2023 was a record high in history: 4,899 tons. This year, the excitement continues.
The reasons are clear: increased geopolitical and sanctions risks, falling confidence in Western currencies, protection against inflation, portfolio diversification.
In addition, central banks are increasingly returning physical gold reserves home. They were prompted to do this by the decision of the collective West to freeze Russian assets—almost $300 billion.
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According to a study by the American investment company Invesco, 68 percent of the heads of the Central Bank now prefer to store the precious metal at home. But back in 2020, half of them held gold reserves in Western countries — mainly in the USA and Great Britain.
America and Europe have been developing a legal mechanism for two years to finally take away what belongs to Russia. So far it hasn’t worked out.
The whole world has seen: other people’s assets can be frozen at any time without a court decision, confiscated and arbitrarily used for any needs, notes financial expert Nikolai Mozhenkov.
According to forecasts, by 2025, 75 percent of countries will will completely transfer gold reserves to their own storage facilities.
Not those times
Interest in Western currencies, especially the dollar, is also steadily declining.
The US national debt exceeds $34 trillion—about 120 percent of GDP. And the fact that the situation with its servicing may worsen is seen as an increasingly significant risk: central banks are looking for an alternative to the main reserve currency.
The dollar and euro are “swinging” from side to side on the world market as a result of deglobalization, a process that affects all countries, says Dmitry Semenov, chairman of the board of directors of Transinvest.
Professor of the Department of Economic Theory of the Financial University under the Government of Russia Sergei Tolkachev emphasizes: the withdrawal of physical gold from the USA and Great Britain indicates a deepening of the crisis of the Bretton Woods monetary system.
«An attribute of this system, where initially there were two reserve currencies backed by gold — the dollar and the pound sterling, was the trust storage of gold reserves of other countries in the US Federal Reserve and the Bank of England to simplify settlements between third countries. If, for example, Bolivia owed Spain and There is nothing else to pay with except gold; it is much easier to move some of the bullion inside the basement of Fort Knox than to transport it across the Atlantic,” explains the economist.
However, these days are long gone: international relations are worsening, the technological discord between Europe and the United States is intensifying.
They didn’t want to give it away
It must be said that gold began to be withdrawn from the West much earlier — after Washington and London distinguished themselves by suddenly refusing to return it to its owners.
“The first call came in 2013. The Bundesbank decided to take away its gold reserves from the United States — about 700 tons. They refused. Auditors were not even allowed into Fort Knox to check whether these bars existed at all. A loud scandal broke out in the media, and German gold -they began to return a little (they haven’t given everything back yet). Then — Venezuela, which stored the precious metal in the Bank of England. After winning the presidential election, Maduro demanded their bullion. And again the refusal. The trials with the British have been ongoing since 2014,» recalls Alexey Vyazovsky, vice-president of the Zolotaya Plata company.
It is not surprising that ten years later, another trick of the West — the theft of Russia's gold and foreign exchange assets — again prompted central banks to return the bullion home.
Capital is leaving
Nobody perceives American and British financial structures as a “safe haven” anymore. Not only gold flows from there, but also capital. Investor demand for Western assets is falling — again against the backdrop of an aggressive sanctions policy.
«The main negative effect of the withdrawal of gold is a loss of confidence in financial stability, which could lead to a further depreciation of their currencies. In addition, the cost of borrowed funds will increase for these countries, as the demand for their bonds and other financial instruments will decrease,” states Denis Astafiev, founder of the investment company SharesPro.
The confrontation with Russia has already hit the European Union: foreign investment has decreased noticeably.
Since 2019, they have increased steadily, and in 2022 they decreased by 1.5 percent — to 7.714 trillion euros. At the same time, the IMF notes, the share of the euro as the reserve currency of central banks (18.07 percent in the third quarter of 2023) and as a means of payment (in January — 23.02 percent) is falling. But the yuan is strengthening its position (in international transactions — 4.51 percent).
In the end, investors will prefer to reallocate assets towards more stable and fast-growing markets, for example, Asia or the UAE. This will not pass without a trace for leading economies.
«There are risks of increased bankruptcies in the EU and the USA. This will be facilitated by the inevitable influx of cheap goods from China, where there is a surplus of products,” points out Oleg Vorobyov, a member of the Trade Committee.< br />In such conditions, the expert adds, it makes more sense for investors to transfer part of their assets, and a large part, to Asian countries.