World central banks no longer trust their gold to the West: the unexpected effect of anti-Russian sanctions

The treacherous position towards Russia has forced the authorities of many countries to return their assets home

Recently, the number of countries willing to store their gold in the West has sharply decreased. This is the unexpected effect of anti-Russian sanctions actively promoted by the collective West. Many states simply lost confidence in him as a reliable guarantor of their gold reserves after freezing assets belonging to Russia and attempting to confiscate them. The political and financial authorities of many countries had a natural question: if they “put their paws on” the assets of the Russian Federation, then what will stop them, given this or that turn of the political situation, from doing the same with our assets – in particular, with gold?

A new and very negative trend for Western countries was revealed by a recent study by the investment company Invesco. It showed that 68% of the world’s central bankers currently prefer to store gold in their countries. Moreover, back in 2020, half of them held gold reserves in the West, whose storage facilities were considered both the most reliable in the world and the most convenient in terms of logistics for gold transactions.

But since then, something has happened that has forced the monetary authorities of many countries to change their minds about the reliability and logistical convenience of storing their gold reserves. Namely: in the wake of anti-Russian sanctions, the West carried out a demonstrative and legally unjustified freeze of Russian assets worth almost $300 billion without any court decisions. And he didn’t stop there, but began to actively discuss in front of the whole world the process of their confiscation and unauthorized diversion to the needs of the political leadership of Western countries. With this approach, experts predict that by 2025, three quarters or 75% of countries will completely transfer gold reserves to their own storage facilities.

Apparently, states that do not belong to the collective West will never again be able to consider its financial structures – primarily in the USA and Great Britain – as a “safe haven” for their reserves. In this regard, not only gold, but also capital in other assets leaves them. In any case, financial statistics record a decline in the share of the euro as the reserve currency of central banks and a means of payment.

As for gold, the world’s central banks have been actively stocking up on this precious metal throughout the past year, increasing its share in reserves and displacing the dollar. In 2023, annual net purchases of gold by global central banks amounted to 1,037 tons. The volume almost equaled the record year of 2022, when central banks purchased 1,082 tons. The total demand for gold in the world, taking into account significant volumes of the over-the-counter market, became a record in 2023 in history and amounted to 4,899 tons. By the way, the main buyers of gold last year were China and Turkey – countries friendly to Russia, which over the past two years have become our main partners.

At the same time, there are fewer and fewer people willing to store gold bars in the West – trust disappeared 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 did not want to give away someone else’s property. Alexey Vyazovsky, vice president of the Zolotaya Plata company, recalled this. According to him, Washington and London in the last decade have not shied away from “fooling around” with other people’s gold. Back in 2013, the Bundesbank intended to take away its gold reserves from the United States – about 700 tons. But he was refused, and the bank’s auditors were not even allowed into Fort Knox (the legendary American gold storage facility. – MK’s note) to check whether these bars were there at all. A loud international scandal broke out, and America was nevertheless forced to return the German gold – but in small quantities (not all have been returned yet). Then a scandal broke out with Venezuela, which stored the precious metal at the Bank of England. London also did not want to return their gold to Caracas at the request of President Maduro. And again, an international scandal and trials that have been going on since 2014… The blatant story of frozen Russian assets, including gold, became a kind of crowning achievement of this arbitrariness.

It is no coincidence that lawyers in the West still cannot justify the appropriation of Russian assets and gold, in particular. There are no legal grounds for this, points out economist Andrei Loboda, director of communications at BitRiver. At the same time, Western politicians do not reduce their efforts in the field of information pressure on Moscow, making Russia “toxic” as a major participant in the global financial market. “Appropriating other people’s money is a favorite pastime in the West. Recent scandals involving the misappropriation of Venezuelan gold reserves have not yet subsided; the implementation of a negative scenario against Russia is very likely,” the expert asserts.

But, according to him, this process also has a downside, which becomes more and more obvious to third countries over time. The Western financial system is already incurring significant reputational and economic costs, and the economies of Western countries themselves are in a state of steady and long-term decline. “The next cycle of crisis in the West is just beginning – with the theft of other people’s money, with the deterioration of the investment climate, with the decline in industrial production and quality of life,” says Andrei Loboda.

Leading expert at the Center for Political Technologies Nikita Maslennikov, in turn, recalls that the American Ministry of Finance opposed the idea of ​​confiscating Russian assets back in 2014-2015, and as a result, it managed to restrain then-President Barack Obama from such a step. All the reputational costs for the American economy and the dollar were clear to the monetary authorities even then. But today, according to the expert, the risks are much higher, as is the degree of confrontation. The West’s position regarding Russian assets will accelerate the process of defragmentation of the global economy, which is already underway. The world’s central banks will also suffer damage from this, Maslennikov points out. Understanding this, they seek to withdraw their assets, in particular gold, to their home – for reasons of financial security.