tl;dr
Central banks worldwide are increasingly purchasing gold from domestic artisanal and small-scale miners to boost reserves cost-effectively and support local economies. A World Gold Council survey shows 19 of 36 central banks buy gold in local currency directly from miners, with leadership from Afric...
Central banks worldwide are increasingly turning to domestic gold mines to bolster their gold reserves. This trend, noted by experts and the World Gold Council, reflects a strategic shift toward more cost-effective and locally supportive methods of reserve enhancement. By sourcing gold directly from artisanal and small-scale miners within their borders, central banks not only reduce dependency on foreign exchange reserves but also strengthen the domestic mining industry and local economies.
The World Gold Council’s recent survey reveals that 19 out of 36 central banks are now purchasing gold in local currency directly from domestic miners, an increase from previous years. African and Latin American countries, including Ghana, Tanzania, Colombia, Zambia, Mongolia, and the Philippines, demonstrate leadership in this approach. For instance, Ghana’s Gold Board has arranged to buy a significant portion of output from local mining firms, while Tanzania mandates that exporters allocate a share of gold output for central bank purchase.
Financially, buying gold domestically can be advantageous. Central banks often secure gold at a discount compared to international markets, saving on intermediary fees and shipping costs. Moreover, by using local currencies, these banks avoid depleting other foreign reserve assets. However, processing and refining the gold to meet international London Good Delivery (LGD) standards presents additional costs, particularly if domestic refining capability is lacking. Countries like the Philippines and Kazakhstan, with accredited local refiners, mitigate these expenses, unlike others that must rely on external refineries.
Strategically, expanding gold reserves through local purchases enhances monetary flexibility and buffer capacity against financial shocks amid rising global uncertainties. Nearly 95% of central banks surveyed anticipate increasing their gold holdings, recognizing the value of diversifying reserve assets without the need to convert existing foreign currency reserves.
Supporting domestic mining sectors also provides tangible socio-economic benefits. Central bank purchases create legal, stable, and fair markets for small-scale miners, many of whom operate informally. This structured demand helps circumvent illicit trade and promotes traceability and accountability within the gold supply chain. However, risks linger around labor practices and environmental concerns linked to artisanal mining, prompting calls for responsible sourcing facilitated by the financial strength and influence of central banks.
Ultimately, the growing preference for securing gold reserves locally reflects a multifaceted strategy: strengthening national reserves cost-effectively, supporting local economies, and fostering more transparent and sustainable gold mining practices. As gold prices continue to climb and geopolitical risks persist, this trend signals an evolving landscape in how central banks manage and augment their critical reserve assets.