Mongolia Prepares To Ramp Up Gold Purchases
(Kitco News) - The Bank of Mongolia (BoM) announced on Tuesday a five-month campaign aimed at increasing national gold reserves under the “Gold-2” national program.
Named the "National Gold to the Fund of Treasures,” the campaign encourages gold miners and individuals to sell gold to the central bank and commercial banks, while introducing training and educational programs for the public on the process of gold purchases, according to a statement from the BoM.
In the first four months of 2018, Mongolia’s central bank has purchased 3.3 tons of gold, an increase of 8% compared to the same period a year ago.
Mongolia’s long-term trend in gold reserve balance mirrors the growth in foreign exchange reserves – as of April, international currency reserves stood at 2.98 billion USD, up from 1.23 billion USD a year ago.
Despite Mongolia’s ambitions to boost gold reserves, the country’s holdings remain relatively small, even when compared to other developing nations. According to the World Gold Council, as of May, only 6% of the country's total foreign reserves is in gold. The world leader, the U.S., holds 75% of total foreign reserves in gold.
Mongolia is heavily reliant on the mining sector, with mining accounting for 20% of the country’s GDP, according to the World Bank. Providing incentives for miners could potentially raise economic security.
This wouldn’t be the first time the government has set up gold purchase campaigns. In August of last year, the central bank launched a three-month campaign called “Mongol Gold,” with a similar mandate of promoting gold submission to the bank and raising awareness of legal procedures associated with buying gold.
In the past, the major obstacle for individuals selling gold to the government was high transaction fees. Submissions rose significantly after fees were dropped from 68 percent to 2.5 percent.
Challenges surrounding infrastructure remain, as there are no testing facilities in the BoM’s rural branches which are needed to collect gold.