Russians are buying gold en masse: economist Goikhman warned about the consequences of the fever

“This is not a panacea for economic disasters”

How to preserve your savings in conditions of turbulence and instability in the economy is the most important question for most citizens. It seems that the Russians have found the answer: the population has become actively interested in gold bars. Despite the increase in the price per ounce of the precious metal since the beginning of the year by almost 10%, people continue to invest in it. The authorities also had a hand in this “gold rush”, allowing individuals not to pay VAT when purchasing gold and personal income tax when selling it. But can bullion be considered an effective tool from an investment point of view? Has gold become a full-fledged alternative to dollars and how much can holders of the precious metal earn?

Gold has been perceived for centuries as a “safety asset” in times of financial and political risk. Obviously, these factors have become the basis for the demand for the “yellow metal” in Russia in recent months, against the backdrop of a noticeable increase in inflation and a weakening ruble. In addition, in many ways it is perceived as a certain replacement for hard currencies due to restrictions on their use, purchase, and circulation.

It should be taken into account that the price of the precious metal has increased sharply since December 2022 – from $1,780 to $2,130 – the annual peak in 2023.

Demand for gold is being pushed by significant volumes of free funds in investor accounts, with a sharp reduction in the number of available investment instruments in Russian jurisdiction, says Evgeniy Mironyuk, stock market expert at BCS World of Investments. The turnover of the Moscow Exchange for 11 months of 2023 exceeded 1.2 quadrillion rubles. In addition, 9 trillion rubles have accumulated in the accounts of retail investors. The reason for the significant liquidity surplus in the Russian market and the concentration of capital in the hands of individual investors was the annual growth of the money supply by 20.5%, a massive increase in wages due to a shortage in the labor market, and budgetary incentives.

But gold is not a “toy” for everyone, experts warn. “Investing in physical gold is for the wealthy, since in addition to purchasing the precious metal, it is necessary to ensure its safety. That is, take into account the costs of security or renting a safe deposit box,” notes Mironyuk.

Meanwhile, Mark Goikhman, an analyst at the Capital Skills Financial Academy, emphasizes that gold is a very specific investment instrument. After all, investments in themselves do not directly yield interest or dividends, unlike deposits, stocks, and bonds. In addition, investments in physical gold (bars, coins) always have a large difference between the purchase and sale prices.

“There are risks of loss, theft, damage, and storage costs. For jewelry – a decrease in value due to wear and tear,” says the expert. “Gold cannot be viewed as a 100% investment panacea for all economic disasters.”

At the same time, BitRiver Communications Director Andrei Loboda emphasizes that gold can be bought by any private investor, including those with an average or even a small income. “The cost of investing in gold will depend only on how many grams of the precious metal you can afford – the heavier your bullion or the more grams of gold equivalent you buy, the more you will have to pay, respectively. But this is similar to purchasing gold jewelry, the price of which is directly proportional to its weight,” says the expert.

According to Loboda, gold was a great investment idea in 2023 and will likely be the same in 2024, given that the dollar will almost certainly become cheaper. “We expect that this year gold will rise in price to at least $2,100-2,150 per troy ounce,” he predicts.

Let us remind you that the record for investments by Russians in 2022 was 75 tons of investment gold. This is 15 times more than in 2021.

In the coming year, we can hardly expect a massive flow of citizens’ funds into gold assets. But gold will definitely be in demand. Valery Tumin, director of Russian and CIS markets for fam Properties, told MK about this.

“Russians, as a rule, adhere to the following principles of investing capital. If there is a limited amount of funds, they end up in bank deposits; when there are more funds, part of them is invested in real estate. Further, free funds are already invested in shares, OFZs and other instruments. And the larger the investment portfolio, the greater the need for diversification and acquisition of protective assets. And it is in this capacity that gold and other precious metals are usually considered,” the expert noted.