Hello and welcome. I’m Anissa Boulahya from DD Metals DMCC. Today, I will provide you insights on ‘Central Banks Affinity to Physical Gold, its inherent relationship and we will dwell further on what is takes and its benefits for central banks to effectively manage their gold reserves?’.
So why are central banks purchasing physical gold for their reserves even though gold prices are rising?
• It is a natural hedge against the USD and serves a wider purpose as a portfolio diversifier.
• It’s fungibility and acceptance in global markets as the only reserve asset provides access to immediate liquidity to cover for national emergencies, pandemics and other unforeseen circumstances
• Rather than outright sale, it can be used as a collateral and the repayment in physical gold against a national debt enables less stress on maintaining FX reserves
• Moving away from keeping USD reserves and managing the local currency fluctuations against the USD
• More reliable store of value than depending on USD reserves
Central banks globally have understood the importance of keeping physical gold reserves and its unquestionable benefits. Gold reserves management is the key to ensure optimal utilization of the central bank gold reserves.
Gold Reserves management is a process that ensures adequate official public sector foreign assets are readily available to and controlled by the authorities for meeting a defined range of objectives for a country.
This includes managing gold production, maintaining adequate gold reserves liquidity, developing a gold trading eco-system and mitigating their associated risks. Gold reserve management aims to fulfil the principles of asset safety, liquidity and financial returns for a nation.
To add here, Gold supply chain management is the is the management of the flow of goods and services as well as overseeing the processes that convert original materials into final products.
It involves delivering the right product at the right time to the right place and at the right price.
The outcome is proper optimal utilization of resources, increasing production efficiency, cost reduction and maximization of profits.
This includes establishing and implementing Chain-of Custody regulation (from mine extraction to gold trading returns) and procedures based on the globally accepted OECD Guidance for responsible souring of gold covering key topics such as
- Anti-Money Laundering
- Combating Financing of Terrorism
- Combating Human Rights abuses, Forced and Worst Forms of Child Labour
- Mitigating the risks associated with corruption, bribery, smuggling and non-payment of relevant government fees
This requires continuous on-the-ground activities for identifying, assessing, mitigating, reporting and on-going monitoring of operational and financial risks.
The most important benefit of gold reserves and supply chain management is enhancing the livelihoods of Artisanal & Small-Scale mining industry and boosting the national reserves for the country’s economic stability.
By formalization of a regulated gold mining eco-system enables long term sustainability.
Enhancing the physical and market infrastructure, implementation of technology and processes that enhance the production yield, conversion of low quality gold purity to internationally accepted trading standards brings immediate access to liquidity from global pools.
The education and transfer of knowledge provides for employment creation guaranteeing a brighter future for the youth. Central Banks can use physical gold to derive immense socio-economic returns.
Thank you for watching me. Please stay tuned for more such insightful videos on various topics in the global gold industry. Stay Safe and See you soon.