Home industry banking-and-finance gold investors face bind over Russian gold bars

Gold investors face bind over Russian gold bars

Banking And Finance

CIO Bulletin
2022-08-01

Certain investors want Russian gold off their books, but it’s not easy to remove.

An effective ban on Russian bullion minted after Russia invaded Ukraine—instigated by the London market in early March—does not apply to hundreds of tons of gold sitting in commercial vaults since before the conflict started.

According to investors and bankers, fund managers looking to sell the metal to avoid deepening the reputational risk of holding assets linked to Russia in their portfolios could trigger a costly scramble to replace non-Russian gold.

Christopher Mellor at Invesco said this would only damage investors, not the Russian regime. His fund at Invesco has nearly 265 tons of gold, 35 tons produced in Russia, with a market value of almost $2 billion.

The dilemma faced by investors reflects Russia’s influence in the global bullion trade and its hub, the London market, where gold worth nearly $50 billion changes hands every day in private deals.

A rapid selloff of gold from Russia—a top three supplier—would potentially disrupt that trade by undermining the principle that all bars in the London trading system are interchangeable regardless of their origin, according to three high-level bankers at major gold trading banks.