As Russia faces tough Western sanctions, The London Bullion Market Association (LBMA) abruptly announced that it has suspended the membership of six Russian precious metals refiners. This means these refineries will not be able to sell gold and silver in the London market (the largest in the world).
According to foreign reports such as Reuters and Kito News, the LBMA did not explain the reason for the action. However, the LBMA told Reuters last week that the association had asked the refiners whether they had business dealings with sanctioned Russian entities.
After the Kremlin sent troops to invade Ukraine on February 24, Western countries imposed severe sanctions on many Russian individuals, many companies and banks, as well as the Russian central bank.
According to statistics from consultancy Metals Focus, Russia produces about 330 metric tons of gold annually, which is about US$20 billion at current market prices, accounting for 9% of the total global gold mining volume; the annual silver production is 1,350 metric tons (about 1 billion US dollars), accounting for about 100 million US dollars in the world. 5% supply.
Most of these mined gold and silver are bought by Russian commercial banks and sent to refineries for smelting, and then sold overseas or the Russian central bank.
The six refineries suspended by the LMBA are JSC Krastsvetmet, JSC Novosibirsk Refinery, JSC Uralelectromed, Moscow Special Alloys Processing Plant, Prioksky Plant of Non-Ferrous Metals and Shyolkovsky Factory of Secondary Precious Metals.
Ruth Crowell, chief executive of the LBMA, stressed that the action will not have a serious impact on the global supply chain, because Russian gold is mainly traded in the domestic market.
It is worth noting that the LBMA’s Good Delivery bullion is regarded as the international benchmark for gold trading, as most gold banks only accept precious metals produced by qualified refineries. In other words, the decision is tantamount to banning new Russian-made gold bars from entering the multi-trillion-dollar London precious metals market.
Goldman Sachs: Russia may be forced to trade in gold
Zero Hedge reported on March 1, The Global CIO Office CEO Gary Dugan pointed out that although the short-term trend of gold prices is unpredictable, the medium-term is still optimistic. The West freezes the Russian central bank’s foreign exchange reserves overseas. If the Russian central bank is forced to use the large amount of gold hoarded at home to continue to trade with foreign countries (most likely China), then the uniqueness of gold as the ultimate currency will be highlighted.
However, since there is little interest in settlement of trade through gold outside of China, Russia has to sell a lot of gold at a low price, which may highlight the limited economic scale of gold in the future, and few countries in the world can use gold as the ultimate currency. Goldman Sachs believes that the Russian-Ukrainian war has clearly triggered the risk of stagnant inflation, mainly driven by high oil prices, which shows that gold prices are expected to rise in the next few months, with a target price of $2,150 an ounce.