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Mongolia's Central Bank Is Ramping Up Gold Purchases

John Galt

Updated: December 7, 2022

Central banks largest gold holdings
Editor’s Note:

EDITOR'S NOTE: The Mongolian central bank just purchased 20 tons of gold in 2022, just 4 tons shy of its 24-ton objective. At a time when inflation is spreading like a contagion across the global economy, Mongolia seeks to ensure its economic stability by diversifying its foreign exchange reserves with the only monetary asset class capable of buffering all other currencies in its stash. On an interesting historical note (Wikipedia), medieval Mongolia “used Chinese silver ingots as unified money of public account while circulating paper money in China and coins in the western areas of the empire.” Whereas people then were skeptical about paper money (possibly because banks can inflate it via legal counterfeiting?), the historical Khanate enforced it under the pain of death. Still, the Khanate understood where real monetary value lay (at the time, physical silver), and kept the “real” stuff largely to themselves. Fast forward to today, paper money is considered the norm. But under times of economic uncertainty, physical gold, as Mongolia’s actions today attests, is the main antidote to the devaluative “trickery” of fiat.

Mongolia’s central bank purchased a total of 19.9 tons of gold in the first 11 months of this year from legal entities and individuals.

As of November, the Bank of Mongolia’s average gold purchase price had been 197,545 Mongolian tugriks (57.7 U.S. dollars) per gram, the bank said in a statement.

Purchasing gold is one of the key ways for the central bank to ensure the country’s economic stability by consistently increasing foreign currency reserves, said the bank.

Mongolia’s foreign exchange reserves fell to 2.8 billion dollars at the end of October, down 36 percent from the beginning of this year, the bank said.

Central banks across the world typically hold gold as part of their foreign exchange reserves.

The Mongolian central bank has set a goal to purchase at least 24 tons of gold in 2022 to increase the country’s foreign exchange reserves.

Originally published on Macau Business.

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