Listen to the article
Over the past year, the value of Lebanon’s gold reserves has been steadily increasing. As of the end of October, these reserves were estimated at 18.4 billion US dollars, marking a substantial annual increase of 21.7%.
The gold reserves held by the Central Bank Lebanon (BDL) amount to over 13,000 bars and 600,000 coins, according to an audit report conducted by ALS Inspection UK, commissioned by KPMG, in collaboration with the International Monetary Fund (IMF).
As of the end of October, the assessed value of this gold stands at 18.4 billion dollars, reflecting an increase of 10.6%, or 1.8 billion dollars compared to December 2022 and a year-on-year rise of 21.7% or 3.3 billion dollars. The peak value of BDL’s gold reserves reached 18.7 billion dollars on April 15, 2023.
It’s important to highlight that this audit does not factor in the 40.2% of gold reserves stored at Fort Knox in the United States. Lebanon’s comprehensive gold reserves stand at 286 tons or 9.22 million troy ounces (OZT) (1 OZT = 31.1 grams).
What are the reasons behind this significant increase in gold reserves?
Chief Economist of Byblos Bank, Nassib Ghobril, believes that the war in Gaza is not the main reason behind the recent increase in the price of gold, even though it has somewhat contributed to it, given the high demand for this precious metal. He explains that the main reason is the acceleration of capital flows between March and May 2023 into Gold Backed Exchange Traded Funds (ETFs), which are financial instruments designed to mirror the price of gold. They allow investors to track the price of gold without having to actually buy the metal. According to Nassib Ghobril, another significant reason is “the decrease in the price of US Treasury bonds (T-bonds), leading to an increase in their returns.”
No impact on the economy
Economist Fouad Zmokhol upholds that the wartime economy, coupled with the risk of regional entanglement, results in an increase in the prices of metals and oil. Nevertheless, if OPEC successfully regulates the price of oil, managing the price of gold is more challenging due to the ongoing “gold rush.”
He nevertheless believes that the value assigned to Lebanon’s gold will not yield any positive impact on the national economy, given the significantly higher cost of the war economy, especially in the absence of needed reforms. It’s worth noting that a projected growth of approximately 3% by the end of 2023 is unlikely to materialize. This is due to the fact that the two million tourists expected to visit Lebanon for the holidays might not do so, not to mention the planned investments put on hold.
Zmokhol points out that this gold is not being exploited. “These are simply accounting values with no impact on our economy,” he concludes.
How far can the price of gold increase?
Since the beginning of 2023, the price of gold has experienced a steady increase, and analysts predict that this upward trend will persist, driven in part by inflation, the accumulation of gold by certain countries and the risks of a recession.
According to some experts in the precious metals sector, if economic trends persist or intensify, the price of gold could quickly surpass $2,100. On Monday, November 13, an ounce of gold was trading at $1,938.05 and one gram at $58.40.
