(Bloomberg) Some gold refineries refuse to re-melt Russian gold bars even though market rules allow them to do so, in a sign of how toxic the country's products have become in some commodity markets.
The London Bullion Market Association (LBMA), a club of large banks that acts as the supervisor of the world's most important gold market, has drawn a distinction between newly produced Russian gold, which it has excluded from its market, and metal that was produced before the invasion, whose commercialization continues to allow. However, at least two major gold refineries refuse to re-melt the old Russian bullion, according to people familiar with the situation who asked not to be identified because it was a private matter.
The status of Russian gold pariah underscores the contradictions of the commodity markets in the face of the Moscow war. The LBMA soon suspended the six Russian refineries from its list of accredited companies in March, which amounts to a ban on the country's new gold being traded in London. Meanwhile, energy exports continue to flow to Europe and Western trading houses continue to buy and sell Russian raw materials.
A spokesman for the LBMA confirmed that it had recently informed refineries that they can accept Russian ingots minted before the suspension of the country's accredited companies. However, refineries are reluctant to remelt the metal. Doing so would effectively hide their origin, since the remanufactured ingots are stamped with the logo of the new refinery.
A spokesman for Argor-Heraeus SA, one of the leading Swiss refineries, said the company would accept refined bars in Russia before 2022. Customers must submit documents demonstrating that doing so does not benefit a Russian person or entity financially.
Russian metal supplies have also sown discord in the copper industry. The copper committee of the London Metals Exchange, an advisory group representing the sector, voted earlier this month to recommend a ban on new deliveries of Russian metal. However, the exchange said it did not plan to take any action that went beyond the sanctions imposed by Governments.
Russia is the world's second largest producer of gold, according to data from the World Gold Council, and has so far been a major supplier to Western markets. Ingots minted by Russian refineries are housed in the vaults of major bullion banks, such as JPMorgan Chase & Co. and HSBC Holdings Plc, as part of exchange-traded funds, according to their documents.
Invesco Ltd., which manages the third largest publicly traded gold product, said it had no plans to change Russian bullion in its holdings, as they can still be traded on the market. State Street Corp., which manages the largest gold ETF, declined to comment. BlackRock Inc., which manages the second largest, did not respond to requests for comment.
Original Note:
Russian Gold Bars Shunned by Some Refiners as War Leaves Stigma
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