Hidden away in high-security bank vaults in London, Zurich and New York, billions of dollars worth of Russian-origin gold has quietly changed hands in recent months in response to Moscow’s invasion of Ukraine.
Data from 11 Western investment funds show that Russian bullion worth a total of $2.2 billion at current prices was removed from their accounts between July and November.
Funds storing gold have shrunk in recent months as rising interest rates prompted disinvestment from gold. But the data, compiled by Reuters, shows that Russian gold is being drained at a much faster rate than that from other countries.
While a small fraction of the total amount of Russian gold held by wealth managers, it reflects a shift, with some funds saying they no longer want to hold assets linked to Russia.
Two sources at exchange-traded funds (ETFs) with hundreds of tonnes of gold said they would like to divest from the metal originating in Russia. One said he had asked the bank he paid to store his treasury gold to allocate as little Russian metal as possible.
ETFs are among the largest holders of gold, and many publicly list the bars they own. This means investors can see if they have Russian gold as each bar is stamped with its origin.
“Some customers click on the bar list, see a lot of Russia and say, ‘What’s going on?'” said one source.
“It’s hard to explain it to them. We want to make the barriers to entry (to the fund) as low as possible and anything that would make them doubt that this is the right product we’re trying to eliminate,” the source added.
In the months following Russia’s invasion of Ukraine, banks have resisted calls from treasuries to get rid of Russian gold, fearing a market-disrupting sell-off.
But the sanctions prevent funds from owning new gold from Russia, which is one of the world’s biggest producers, mining about 330 tonnes a year worth $19 billion at current prices.
The amount of gold stored in London vaults tracked by the London Bullion Market Association (LBMA) fell by 468 tonnes, or 5%, in the first 11 months of the year. British and Swiss customs show huge shipments to China, India and other countries in Asia and the Middle East.
