Daily Management Review

Nation of Gold Bugs Being Built by Currency Pioneers on Ex-Soviet Fringes


02/17/2017




Nation of Gold Bugs Being Built by Currency Pioneers on Ex-Soviet Fringes
By shifting savings from cattle to gold, an experiment with little parallel worldwide is being embarked upon by a landlocked nation perched between China and Kazakhstan.
 
Kyrgyzstan’s central bank wants every citizen to diversify into gold and the country was one of the first post-Soviet republics to adopt a new currency and let it trade freely. This Central Asian country’s biggest export is gold and the “dream” is for every one of the 6 million citizens to own at least 100 grams (3.5 ounces) of the precious metal, according to Governor Tolkunbek Abdygulov.
 
 “Gold can be stored for a long time and, despite the price fluctuations on international markets, it doesn’t lose its value for the population as a means of savings,” he said in an interview. “I’ll try to turn the dream into reality faster.”
 
Abdygulov, 40, said by phone from the capital, Bishkek that about 140 kilograms of bullion have been sold, in the two years that the central bank has offered bars directly to the population.
 
“We are hopeful that our country’s population will learn to diversify its savings into assets that are more liquid and -- more importantly -- capable of retaining their value,” he said. According to Abdygulov, cattle is still the asset of choice for investors and savers in rural areas.
 
By stepping up buying even as its counterparts cut purchase in 2016 to a six-year low, Kyrgyzstan has bucked a trend among central banks, the biggest owners of bullion. According to the World Gold Council, global combined bar and coin demand fell.
 
Gold is often seen as the ultimate haven at times of upheaval and it does not need any extra promotion across the emerging world. By encouraging its citizens to deposit private gold holdings in banks, India, the world’s largest consumer after China, is in fact taking steps to curb imports of the precious metal.
 
The Turkish people were called to convert their foreign-currency savings into liras and gold by the President Recep Tayyip Erdogan last year in a country where banks can use bullion as part of their reserve assets.
 
By providing infrastructure for safe-keeping and investment, the central bank of Kyrgyzstan has been trying to win conversion. Varying in weight from 1 to 100 grams, the central bank produces bars of different sizes.
 
If all of the country’s population converts to gold, it would be equivalent to 30 times the nation’s current annual output and about 600 tons of gold and hence the central bank governor believes his plan is realistic. The timeframe for when his goal of 100 grams per person can be met was declined by Abdygulov.
 
He said that safe deposit boxes at commercial lenders or with the central bank are included in the options available for storage. According to Abdygulov, some people even bury gold in the ground or keep gold at home.
 
“For Kyrgyzstan, gold is an alternative instrument of investment,” Abdygulov said. “The National Bank has ensured liquidity for gold -- we aren’t only selling, but also buying back gold bars that we produced and sold.”
 
(Source:www.bloomberg.com) 






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