February 4, 2023

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Analysis – Russian gold removed from some western funds after Ukraine By Reuters

©Reuters. FILE PHOTO: Marked bars of 99.99 percent pure gold are placed in a trolley at the Krastsvetmet Nonferrous Metals Plant in the Siberian city of Krasnoyarsk, Russia, March 10, 2022. REUTERS/Alexander Manzyuk

By Peter Hobson

LONDON (Reuters) – Hidden in high-security bank vaults in London, Zurich and New York, billions of dollars’ worth of Russian-origin gold has quietly changed hands in recent months in response to Moscow’s invasion of Ukraine.

Data from 11 western mutual funds shows that between July and November a total of $2.2 billion worth of Russian gold was removed from their accounts at current prices.

Funds storing gold have shrunk in recent months as rising interest rates prompted divestment of bullion. But data compiled by Reuters shows that Russian gold is being removed significantly faster than that from other countries.

Although asset managers only hold a small fraction of all Russian gold, it reflects a shift as some funds say they no longer want to hold Russia-related assets.

Two sources at exchange-traded funds (ETFs) with hundreds of tons of gold said they would like to divest metals originating in Russia. One said he asked the bank, which was paid to store his fund’s gold, to allocate as little Russian metal to it as possible.

ETFs are among the largest holders of gold bars, and many publicly list the bars they own. This means investors can see if they have Russian gold as each bar is stamped with its provenance.

“Some customers click on the bar list and see a lot of Russia and are like, ‘Whoa, what’s up?'” a source said.

“It’s difficult to explain to them. We want to make the barriers to entry (to the fund) as low as possible and anything that makes you doubt this is the right product we try to remove,” the source added.

Click here for a FACTBOX detailing ETF gold holdings.


In the months following Russia’s invasion of Ukraine, banks resisted calls from funds to remove Russian gold, fearing a sell-off that would disrupt the market.

“We didn’t want a sudden sell-off of all Russian metal,” said an executive at one of the banks that stock gold for ETFs, who spoke to Reuters on condition of anonymity.

“It was phased out in a controlled, normal manner,” the executive said of the removal of Russian gold.

Funds don’t have to sell their holdings because gold produced in Russia before March 7, just before Moscow launched a so-called “special military operation” in Ukraine, is not covered by Western sanctions against Moscow unless it is owned a sanctioned Russian person or company.

But sanctions prohibit funds from holding new gold from Russia, which is one of the world’s largest producers, mining around 330 tons a year worth $19 billion at current prices.

Two people at banks that store gold said some funds that publicly disclose the origins of their holdings are concerned that investors may not want them holding Russian metal, while other gold holders who don’t publish such data are less concerned are.

Russian gold removed from such funds was often reassigned to other owners in the same location, the bankers said.

However, some have been shipped to Asia, where demand has been strong in recent months, according to bankers, analysts and customs data.

The amount of gold stored in vaults in London, monitored by the London Bullion Market Association (LBMA), is down 468 tonnes, or 5%, over the first 11 months of the year. British and Swiss customs data shows huge shipments to China, India and other countries in Asia and the Middle East.


Reuters analyzed the holdings of eleven of the largest ETFs.

Together they held nearly 2,300 tons of gold worth $130 billion at the end of November.

Most of the gold held by ETFs is managed by JP Morgan, HSBC and ICBC Standard.

ICBC Standard is the smallest, holding around 100 tons of gold for the 11 funds tracked by Reuters, and has moved the fastest, reducing Russian gold in those funds by 47%, while non-Russian gold is up 16% since mid-July.

HSBC, which stockpiled around 1,100 tons of gold for the tracked funds, reduced Russian gold in its accounts by 20% and non-Russian gold by 10% since July.

JP Morgan, which stockpiled around 1,050 tonnes of gold for the funds, reduced Russian gold by 13% and non-Russian gold by 9%.

All three banks declined to comment.

Of the funds, eight had reduced the percentage of Russian gold in their inventories since July, while two, run by Amundi and WisdomTree, had disposed of all Russian metal.

Amundi and WisdomTree did not respond to requests for comment.

Since July, the total amount of Russian metal in the 11 funds is down 19%, while non-Russian gold is down 9%.

However, the two largest funds, BlackRock’s (NYSE:) iShares Gold Trust and the World Gold Council’s SPDR Gold Shares (NYSE:), increased their holdings in Russian gold.

The WGC said its funds are governed by the London Bullion Market Association’s rules under which pre-war Russian gold can be traded. BlackRock declined to comment.

At the end of November, 7% of the bullion in the 11 funds was Russian, up from 7.8% in mid-July.

The shift of some ETFs away from Russian gold is fragmenting a market where traditionally all bars have been equal.

Some funds already only carry newer bullion bars, which they say are sourced more responsibly than older ones.

But not many big funds expect to be able to reliably claim Russian gold-free anytime soon, as ETFs typically source metal from the broader market and need to take eligible gold, even if it’s Russian, although later they may try to remove it.

“In theory, they could come to us with 100% Russian bars and we would have to accept them,” the ETF board said.

“It’s a long way. I have no expectation that there will be no Russian gold anywhere any time soon.”