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What does Russia’s G7 gold ban mean for gold stocks?


Gold Forbidden Means Stocks?

G7 is scheduled to announce a ban on Russian gold imports. But does that really matter to investors? While there has been no official Russian gold ban so far, the news is not exactly a surprise to the industry. Today, we are seeing that the price of gold lacks reaction.

Usually, an import ban on a particular good causes prices to skyrocket. Just look at what happened to oil after Russia invaded Ukraine. As it relates to gold, prices were also initially moving higher this morning, with futures opening below 1%.

However, it has now dropped during the day, as well as VanEck Gold Miners ETF (NYSEARCA:GDX) and VanEck Gold Miners ETF (NYSEARCA:GDXJ).

Does Russia’s Gold Ban Matter?

This latest decision do problem. However, it will have a limited impact on the global gold market and gold mining stocks. Warren Patterson, Head of Commodity Strategy at ING Groep NV (NYSE:ING), has the following to say:

“The impact of the G-7 ban on Russian gold imports by the G-7 countries is likely to be quite limited, given that the industry has taken steps to limit Russian gold. […]It looks like it’s largely its logo. “

Russia has world’s fifth largest gold store according to the World Gold Council. However, it exports only about 5% of the world’s gold supply in 2020. A large part of that – more than 90% – goes to the UK, a G7 member. However, Russia will likely find buyers in China and India.

In fact, the buying group may change, but it will not completely evaporate.

How does this affect gold stocks?

At this point, the ban is unlikely to have much of an impact on gold reserves. There are many reasons why this is so.

  1. The industry seems prepared for such a ban.
  2. Russia is not such a big gold exporter.
  3. Efforts from central banks to raise interest rates and strengthen currencies could play a more important role in precious metals prices.

Ultimately, Russia’s gold ban certainly has no effect on gold prices – if at all, less supply is a bullish catalyst – but for now, that catalyst is not resonating in the market. However, removing Russian supply from the market would be a modest positive for gold miners.

First published: InvestorPlace. Read here.

Image credits: powered by Pixabay; Bark; Thank you!



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