Switzerland, which is Europe's largest gold processing and distribution hub, is banning gold imports from Russia. This decision can have negative consequences for the global gold market.
Even though Switzerland is not a gold-mining country (though the Graubunden canton has reserves of up to 100 tons), it's a big player in the gold trading market. Switzerland has a reputation as a key center for yellow metal storage and refinement: over half of the gold in the world is imported, refined, and re-exported from the Alpine confederation.
Here's how Switzerland's gold business model works. The yellow metal mined in South and North America, Russia, and Africa, as well as gold bars from the UK, are imported in large quantities into Switzerland. There, the gold is melted at the refinement plants in the canton of Ticino and exported — mostly to the UK (for ETF reserves), France, India, and China. Up to this point, neither Covid, nor the conflict in Ukraine could disrupt this process.
According to the data of the Swiss Federal Customs, a total of 284 kilograms of gold were imported to Switzerland from Russia in June 2022. But now the country has joined G7's gold embargo: starting from August 3, the Federal Council decided to forbid Swiss residents and companies to buy gold from the Russian reserves, transport or refine it, or provide any services that involve Russian gold.
In early March, the London Bullion Market Association (LBMA) rescinded the wholesale trading licenses and the Good Delivery quality status of all Russian refinement plants. This decision had consequences for Switzerland, too: as the UK interbank market is the only gold and silver trading platform recognized in Switzerland, the Alpine republic cannot accept new bullion from the Russian companies affected by the LBMA sanctions.
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