A Central Banker's Perspective: the role of gold in Kazakhstan


Kazakhstan has rightfully taken a leading global position in the mining and processing of gold; the country produces around 70-80 tonnes of refined product each year.

The success of its domestic refined gold industry, along with the investment characteristics gold has demonstrated throughout the last decade, have positioned it as fundamental to the reserves of the Central Bank of Kazakhstan.     

Aliya Moldabekova, Deputy Chairman of the National Bank of the Republic of Kazakhstan, spoke in detail about the current trends, plans and the results of past years in terms of gold.

Current standing of the gold portfolio in the NBK’s reserves

Gold plays an important role in the management of reserve assets, being one of the few assets that are widely approved under the investment guidelines used by the world's central banks. The National Bank of the Republic of Kazakhstan (NBK) is no exception, with its share of gold reserves now standing at 69% of total reserves. Over the last few years the ambition to grow its gold portfolio has served as the main driver of growth within the NBK’s gold assets. As of July 2022 the bank held 372.8t of refined gold worth about US$21.1bn. These figures put Kazakhstan in 15th place by reserves of gold and in sixth place worldwide by gold holdings growth over the past decade, according to the World Gold Council.

The purpose of gold asset management is to safeguard and protect against possible reductions in the attractiveness of foreign currency assets in international financial markets.

The gold portfolio of the NBK can be structurally divided into ‘internal’ and ‘external’ parts.

The main share of the Bank’s gold portfolio is ‘internal’ domestic gold, which is physical bullion of refined gold stored in the state vault within the country’s territory. The ‘external’ part of the gold portfolio consists of physical bullion stored in specialised foreign repositories, as well as gold in unallocated form in metal accounts made at market rates with major global banks that carry high credit ratings and are accredited by the London Bullion Market Association (LBMA).

Operations of the National Bank in the domestic market

The gold reserves of sovereign Kazakhstan were established in 1995. Despite a dynamic history of growth, the most active phase of procuring gold assets has been during the last decade, following the implementation of legislation that gives the NBK a priority right to purchase gold from domestic producers at market conditions. This approach of effectively managing gold assets while increasing gold reserves has allowed the National Bank to join the top ranks of countries whose central banks have reserves of the precious metal.

In general, preferential purchase of gold by the National Bank has been positive for the local gold industry. It has created conditions that give both counterparty and credit institutions a significant guarantee of stable cash flows from the sale of gold under contract, thereby reducing volatility and uncertainty in the sales market. The NBK represents a reliable buyer and enhances the attraction of investing in gold – and this is supported by the year-on-year growth in the volume of gold it purchases.

It should be noted that the National Bank purchases only the final product in the form of refined gold bars of national and international standards, which are produced at the facilities of local refineries: Kazakhmys Smelting LLP, Kazzinc LLP and Tau-Ken Altyn LLP. Currently, Kazzinc LLP and Tau-Ken Altyn LLP produce refined gold to the international London Good Delivery (LGD) standard. Tau-Ken Altyn LLP's refinery successfully obtained LGD certificate in September 2019. The Balkhash plant, Kazakhmys Smelting LLP, produces refined gold to the national standard.

Before it is refined and sold to the NBK, gold is processed through several key phases.

To improve the quality of its gold portfolio, the NBK re-melts gold bars that are of national standard to meet London Good Delivery standards. The national standard of gold in Kazakhstan has strict requirements for the chemical composition and appearance of bars, compared with the LGD LBMA standard.


Gold operations within the National Bank

Favorable market conditions for precious metals have opened up many new opportunities for the NBK, which in recent years has become much more active in the global gold markets.

The NBK exports physical gold bars to the international market and transacts with derivative financial instruments in order to buy gold. In doing so it hedges its gold portfolio and diversifies its assets. Meanwhile, Kazakhstani gold bars have become widely accepted by world markets.

By its nature, gold investment is protective and allows the NBK to meet its objective of preserving the country’s assets. As well as NBK’s gold reserves, gold is used in Kazakhstan's sovereign fund and in its National Fund, which as of July 2022 held $53.3bn in assets. The National Fund was set up to provide long-term investment of the income derived from the country's oil and gas complex; the Fund invests in a wide range of fixed-income instruments and in equity markets of both developed and emerging countries. In order to diversify assets, the long-term allocation of the Fund was changed in 2019 when the share of gold was set as a maximum of 5% of total assets within the savings portfolio. The gold portfolio of the National Fund is backed by physical gold via a sale of 39.5t of refined gold, previously part of the NBK’s gold assets.


Gold bars continue to gain popularity

From 2017 the National Bank has been selling certified refined gold bars to the public; these bars weigh from 10g to 100g. And in November 2018, bars weighing 5 grams went on sale. The main aim of selling gold bars is to provide the citizens of Kazakhstan with an additional investment and savings tool. A total of 94,600 gold bars with a total weight of 3.2t have been sold to Kazakhstani citizens since their launch. Liquidity is ensured as the investor can resell to banks and non-banking exchange offices and be paid on the same day.

In Kazakhstan, as well as in the rest of the world, the demand for gold as a vehicle for investment is expected to grow. 2021 became a record-breaking year in terms of gold bar sales to the Kazakhstani public and from 2017 to 2021 the cumulative average annual growth rate in sales has been 69%.