What Does the G7 Russian Gold Ban Mean for Gold Stocks?

  • Gold prices are mostly unchanged despite a G7 ban on Russian gold.
  • Bans normally send prices higher, but Russia is responsible for just 5% of gold exports.
  • In reality, rising rates from central banks likely have a bigger impact on precious metal prices.
A photo of a gold nugget on a table, being picked up by tweezers, with more gold behind it.
Source: aerogondo2 / Shutterstock.com

The G7 plans to announce a ban on Russian gold imports. But does that really matter for investors? While there hadn’t been an official Russian gold ban until now, this news isn’t exactly a surprise to the industry. Today, we’re seeing that lack of reaction in gold prices.

Typically, a ban on imports for a particular commodity sends prices soaring higher. Just look at what happened to oil after Russia invaded Ukraine. As it pertains to gold, prices also initially ticked higher this morning, with the futures opening up by under 1%.

However, it has now turned lower on the day, as have the VanEck Gold Miners ETF (NYSEARCA:GDX) and the VanEck Gold Miners ETF (NYSEARCA:GDXJ).

Does the Russian Gold Ban Matter?

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

“The impact from a ban on Russian gold imports by G-7 nations is likely to be fairly limited, given that the industry already took steps to restrict Russian gold […]It looks as though its largely symbolic.”

Russia has the world’s fifth-largest gold stash according to the World Gold Council. However, it only exported roughly 5% of the world’s gold supply in 2020. A bulk of those exports — over 90% — went to the United Kingdom, a G7 member. Still, Russia will likely find buyers in China and India.

In actuality, the buying pool may shift, but it will not completely evaporate.

How Does This Affect Gold Stocks?

At this point, the ban does not seem to have much of an impact on gold stocks. There’s multiple reasons why this is the case.

  1. The industry seems to have largely prepped for such a ban.
  2. Russia is not that large of an exporter of gold.
  3. The efforts from central banks to raise interest rates and strengthen currencies is likely playing a more important role in regards to precious metal prices.

Ultimately, a Russian gold ban certainly doesn’t hurt gold prices — if anything, less supply is a bullish catalyst — but right now that catalyst is not reverberating through the market. However, removing Russian supply from the market will be a modest positive for gold miners.

On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/what-does-the-g7-russian-gold-ban-mean-for-gold-stocks/.

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