Mongol Bank focuses its sights on gold

Mongol Bank has launched a five-month campaign to encourage gold miners to sell their gold to the central bank, as part of the larger Gold-2 national program.

Titled “Mongolia’s Gold to the Treasury Fund”, the project is the continuation of the efforts by the central bank to increase gold reserves. Mongol Bank has intensified its efforts to increase gold reserves as a way to solidify the foreign exchange reserves that had been depleted previously due to the economic crisis.

Beginning in December 2016, Mongol Bank began to purchase gold at market prices on the London Metal Exchange. This significantly increased the amount of gold sales to Mongol Bank. In 2016, the central bank purchased 18.3 tons, while 2017 saw an increase of eight percent with 19.6 tons of gold purchased and 19.4 tons refined to add 692.1 million USD to the foreign exchange reserve.

Due to the fact that gold is unlike any other mineral resource, such as copper or coal, in that it has value beyond monetary worth, the government on all levels has maintained the same stance. That is to maximize gold sales to the central bank and decrease exports.

As President Kh.Battulga said during a parliamentary session, “Because gold is a special metal and its ability to define the value of national currency, approaching gold in a different way is a necessity,” he divulged.

The president reported that he would be introducing a bill to Parliament requiring all gold miners to sell their gold to Mongol Bank. According to him, the government should enjoy privilege in gold mining and purchase.

“Government’s privilege is exercised in our two neighbors [Russia and China] when it comes to gold. Despite all pedantry, the state of Mongolia should have full control over its gold reserve,” he added.

While most of those in power agree on the same goal, the methods used by Parliament and the central bank have been less forceful. Instead, Mongol Bank has helped decreased the gold mining royalty from five percent to 2.5 percent until 2019 and has tried to encourage gold sales through campaigns and incentivized programs.

The latest campaign is aimed at encouraging gold miners and individuals to sell their gold to the central bank and commercial banks, thereby contributing to an increase in the gold reserves. Mongol Bank also seeks to enhance training and promotion on the process of gold sales among the public while also introducing relevant laws and regulations.

In the first four months of this year, Mongol Bank purchased over 3.2 tons of gold from gold mining companies and individuals, an increase of 257.6 kilograms compared to the same period in 2017.

The campaign also seeks to educate and inform the public about unauthorized and illegal gold exports outside of the country. Authorized gold exports are mostly conducted to the United Kingdom and few other countries such as Switzerland. In 2017, the UK imported halfprocessed gold worth 341.55 million USD. In the first quarter of 2018, the UK purchased all of the processed and unprocessed gold exports from Mongolia. This made the UK Mongolia’s second biggest partner in the first quarter of 2018, accounting for 8.9 percent of exports.

In 2017, gold miners sold 20 tons of gold to the central bank, which contributed 800 million USD to the state budget. This was the first time gold purchases surpassed 20 tons since 2005, when it reached a record high of 25 tons.