Mongolia Prepares To Ramp Up Gold Purchases
(Kitco News) - The Bank of Mongolia (BoM) announced on Tuesday a five-monthcampaign aimed at increasing national gold reserves under the “Gold-2” nationalprogram.
Named the "National Gold to the Fund of Treasures,” thecampaign encourages gold miners and individuals to sell gold to the centralbank and commercial banks, while introducing training and educational programsfor the public on the process of gold purchases, according to a statement fromthe BoM.
In the first four months of 2018, Mongolia’s central bankhas purchased 3.3 tons of gold, an increase of 8% compared to the same period ayear ago.
Mongolia’s long-term trend in gold reserve balance mirrorsthe growth in foreign exchange reserves - as of April, international currency reservesstood at 2.98 billion USD, up from 1.23 billion USD a year ago.
Despite Mongolia’s ambitions to boost gold reserves, the country’sholdings remain relatively small, even when compared to other developingnations. 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, withmining 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 upgold purchase campaigns. In August of last year, the central bank launched a three-monthcampaign called “Mongol Gold,” with a similar mandate of promoting goldsubmission to the bank and raising awareness of legal procedures associatedwith buying gold.
In the past, the major obstacle for individuals selling goldto the government was high transaction fees. Submissions rose significantlyafter fees were dropped from 68 percent to 2.5 percent.
Challenges surrounding infrastructure remain, as there areno testing facilities in the BoM’s rural branches which are needed to collectgold.
By David LinFor Kitco News
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