by Peter Schiff, Schiff Gold:
Mongolia wants more gold.
Last week, the Bank of Mongolia launched a campaign dubbed the “National Gold to the Fund of Treasuries.” The goal of the five-month campaign is to encourage miners and individuals to sell gold to the central bank, along with commercial banks, in order to increase their gold reserves.
The Bank of Mongolia has been buying gold since the beginning of the year. It purchased over 3.2 tons of the yellow metal in the first four months of 2018, according to Xinhua News. That represents an 8% increase over the same period in 2017.
Mongolia doesn’t have to depend solely on buying gold to fill its vaults. The country produces plenty of the yellow metal. Gold miners submitted 20.01 tons of gold to the central bank in 2017, contributing $800 million to the state budget.
Mining is an important part of the Mongolian economy, contributing about 20% of GDP. Analysts say providing incentives for miners to sell to the central bank could potentially raise economic security.
This isn’t the first gold-buying initiative by the Bank of Mongolia. According to Xinhua News, the government has carried out a number of measures directed at enriching the treasury fund and improving the legal environment on foreign exchange over past five years. Last year, the central bank ran a three-month campaign called “Mongol Gold.” The goals were similar to the current campaign – promoting gold submission to the bank and raising awareness of legal procedures associated with buying gold.
Even so, Mongolia’s gold reserves remain modest. According to the World Gold Council, about 6% of the country’s total foreign reserves are in gold.
Mongolia is one of several countries actively working to boost their gold reserves. The goal is to increase economic stability and independence.
Last month, Jim Rickards described an evolving “axis of gold” as a number of countries, including China, Russia, Turkey and Iran increasingly use physical metal to create an offensive counterweight to the US dollar.
For instance, Turkey went on a gold-buying spree in 2017 and that trend continued into 2018. In April, Turkish President Recep Tayyip Erdoğan suggested international loans should be made in gold instead of greenbacks in order to prevent exchange rate pressure on economies.
I made a suggestion at a G20 meeting. I asked, ‘Why do we make all loans in dollars? Let’s use another currency.’ I suggest that the loans should be made based on gold.”