July 10, 2023 (MLN): An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday.
The financial market rout last year caused widespread losses for sovereign money managers who are “fundamentally” rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay.
Over 85% of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last, as Reuters reported.
Gold and emerging market bonds are seen as good bets in that environment, but last year’s freezing of almost half of Russia’s $640 billion of gold and forex reserves by the West in response to the invasion of Ukraine also appears to have triggered a shift.
The survey showed a “substantial share” of central banks were concerned by the precedent that had been set. Almost 60 percent of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.
One central bank, quoted anonymously, said: “We did have it (gold) held in London… but now we’ve transferred it back to own country to hold as a safe haven asset and to keep it safe.”
Rod Ringrow, Invesco’s head of official institutions, who oversaw the report, said that is a broadly-held view.
“If it’s my gold then I want it in my country (has) been the mantra we have seen in the last year or so,” he said.
