We conduct all the necessary services to maximize the benefits of the Domestic Purchase Programme;
- Quality Control
- System Integration
- Risk Management
The primary role of central banks is to manage a nation’ resources and investment policies on the longer term.
Once an official currency, Gold has become a cornerstone of modern reserves management and has been at the heart of central banking for centuries.
According to the IMF, Gold is the third most widely held reserve currency after the US Dollar and the euro, and is held by more than four in five central banks. The World Gold Council reported that there is approximately 34,211 tonnes (EUR 1.7 trillion) of above ground physical gold held by central banks as at 31 December 2020. This represents about 17% of the total above ground stocks of physical gold.
Central banks gold reserves are often tranched into two aspects:
Reasons why central banks hold physical gold in their reserves:
World Gold Council Key Highlights:
The proportion of central banks holding higher total reserves than five years ago has increased to 68% from 53% in 2020.The rebound was entirely concentrated in Emerging Markets and Developing Economies (EMDE) central banks, with 75% of EMDE respondents reporting higher total reserves compared to 53% last year.
“As a buffer against balance of payments crises” remains the most relevant reasons for total reserve growth, although the proportion has decreased from last year. “Cross border trade flows have grown”, “as a consequence of exchange rate policy”, and “as a backstop for the domestic financial system” all witnessed significant decreases as reasons for reserve growth.
“Negative interest rates” was rated as relevant by the highest number of respondents, tying with “uncertainty over the economic recovery following COVID-19” which was an option added this year. The strong reaction to both highlights the additional complexity for reserve managers stemming from the pandemic.
Respondents were mixed about the future role of the US dollar, with 50% saying the dollar will occupy a lower position than at present. This is similar to last year's result.
The future role of the euro also elicited mixed forecasts from respondents, with 64% saying that it will occupy a similar or lower proportion compared to its current position. The results are very similar to those in last year’s survey.
Central Bank Gold In Motion
Philippines – Local Buying Program
The People’s Small-Scale Mining Act, introduced in 2001, dovetailed with the Philippine Mining Act. The Small-Scale Mining Act mandated that all small-scale miners must sell their gold to the central bank BSP via designated purchase windows.
Between 1997 and 2011, the value of small-scale gold sold to BSP surged from 4.5 billion (bn) pesos to 34.6bn pesos, an almost eight-fold increase in less than 15 years.
Mongolia – Gold Purchases
The central Bank of Mongolia (BoM) purchased more than 19t of gold in the first ten months of 2020 alone. Official gold production amounted to slightly under 20t in 2020.
Ecuador – Gold as Collateral
The Central Bank of Ecuador BCE recognizes the role that gold can play in effective reserve management.
Reserve managers frequently employ gold swap transactions, pledging a portion of their gold in exchange for hard currency during a fixed period. Upon repayment of the currency the gold is returned to the BCE.
The central bank entered into such a swap in March 2020, raising US$300mn at a time when additional liquidity was required to address the widespread market stress and extreme financial instability caused by the pandemic. Such active use of gold reserves underscores the importance of the BCE’s gold buying programme as a key tool within the central bank’s armoury.
Ethopia – Enhancing Livelihoods
The National Bank of Ethiopia (NBE), the country’s central bank, plays a pivotal role in the formalisation of the artisanal gold mining sector. The central bank is charged with buying gold deposits locally and selling them in international markets, while the Ministry of Mines is responsible for verifying the purity of gold purchased by the NBE
The sector is reported to create an indirect livelihood for 7.5 million people, generating almost US$303mn in revenue in the last five months of 2020, despite the Covid-19 pandemic.
Responsible Supply Chain
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.
We provide expert specialized solutions and services for Central Banks, Governments, Ministries of Mines and other relevant entities to achieve the objective of gold supply chain management.
This includes establishing and implementing Chain-of Custody (from mine extraction to gold trading returns) regulation and procedures based on the globally accepted OECD Guidance for responsible souring of gold from conflict-affected and high risk areas
This requires continuous on-the-ground activities for identifying, assessing, mitigating, reporting and on-going monitoring of operational and financial risks