Russians buy tons of gold bars: the expert warned about the consequences

Ivan Samoylenko, Managing Partner at B&C Agency:

“Gold is a defensive asset that is in high demand during periods of economic instability. Usually, it is during a crisis that sales of metal grow, and not only in Russia. But until last year, buying gold bars was not so common in our country. In 2022, several factors prompted citizens to invest in this precious metal.

First, at the beginning of the year, as we all remember, the Central Bank introduced restrictions on the sale of cash currency to individuals. It became extremely difficult to buy the usual dollars or euros for everyone, and the population was afraid of the devaluation of the ruble. What happened in the spring of 2022 – the dollar rose sharply to 100-120 rubles. Therefore, citizens decided that a worthy alternative to buying currency would be the purchase of gold bars and coins.

Second, gold bullion received tax cuts. Now the bars were sold to citizens without paying VAT, and Russians who intended to sell gold bars no longer had to pay personal income tax. Such an acquisition has become more profitable.

And, of course, the main reason for the growth in demand for gold in our country was the desire of people to protect their savings.

The value of gold on the world market is expressed in dollars (per troy ounce). And prices are relatively stable: $1.8-1.9 thousand per ounce. But in Russia, with the devaluation of the ruble, such investments in gold will save money and even make a profit when selling the precious metal for rubles.”

Valery Emelyanov, stock market expert at BCS World of Investments:

“The “gold rush” is associated with many reasons: a shortage of cash dollars, increased risks of storing currency in banks, ruble instability, a temporary excess of gold in the domestic market, the abolition of the tax (VAT) on bullion and other indulgences from the authorities, the general tone of the state in favor of so that the population saves more in gold, and not in currency.

The conflict in Ukraine is not over yet, and we have no idea how far the current situation will go. If those who bought tens and hundreds of kilograms of bullion turn out to be right, then this will mean that the financial system is destroyed, there is no access to currencies, and gold is the only reasonable store of value. But I do not see any hints of the coming financial apocalypse yet. Accordingly, I do not think that you need to transfer your savings in whole or in large part into gold. It should be no more than 10% of all investments, and preferably in an impersonal form, it is much cheaper and more profitable.

Gold is valued in dollars, and the ruble is consistently weak against the dollar, so devaluations occur every 2-3 years. As a result, in rubles, gold holders earn at least as much as dollar holders (an average of 6% per year). And if you’re lucky, then even a few percent on top. On average, about 8% per year – if we take the last 20 years.

Fedor Sidorov, private investor, founder of the School of Practical Investing:

“Gold is a commodity, precious metal quotes are published daily and are constantly changing. All investors know that gold is the main defensive asset. It is readily acquired by the central banks of states, and large investors, and individuals when there is a danger of losing funds invested in other instruments (stocks, bonds, currencies). Therefore, physical gold is purchased during periods of financial and economic crises, since it is believed that at such a time its price rises, while other instruments most often depreciate.

If you look at the dynamics of gold prices over the years, this trend is clearly visible – precious metal quotes are growing during global crises. Buying gold bars or investment coins offered by central banks of different countries, you can protect your savings from depreciation. As for profit, it is also visible over a long period of time. So investing in gold in order to generate passive income is worth more than 10 years. In 2000, a troy ounce of gold was worth $300 on the world market, and in 2011 it reached a peak of $1.9 thousand. Then there was a price decrease to $1.1 thousand in 2016, and since then the value of the metal has been gradually growing. Currently, an ounce of gold costs almost $2,000. And it is safe to say that in the next year or two, the price of gold will increase: as the recession grows in the world, gold will become an increasingly sought-after commodity.

As for the volume of investments, it all depends on the possibilities. But even if you don’t have much money, it’s worth buying gold – it definitely won’t depreciate, unlike paper money or securities. And you don’t have to buy bullion – bullion coins are more affordable.”

Mark Goykhman, Chief Analyst at TeleTrade:

“Gold is usually positioned as a “protective asset” in case of economic and political risks, an increase in inflation. The demand for it has greatly increased in our country last year precisely for these reasons.

In addition, the tense situation was aggravated by restrictions on the purchase and use of foreign currency, on bank cards. Since the middle of the year there has been a decrease in exchange rates against the ruble, deposit rates, share prices, and real estate prices. All this limited the possibility for Russians to save savings in the usual instruments.

On the other hand, the state also stimulated the increased demand of consumers for gold, proceeding from its completely rational interests. Its purchases by people with savings take money away from the consumer market, which slows down inflation. And the banks that sell bullion have additional risk-free income and an influx of cash liquidity in the face of shrinking earning opportunities in many other operations. The Central Bank and the Ministry of Finance can use the “non-frozen” part of the reserves more widely by selling gold from them to the population and companies. Based on this, in 2022, exemptions on taxes on transactions with precious metals were promptly introduced.

The combination of these factors led to an increased demand for gold from citizens. And in many ways it is on the “live” gold, palpable in the hands. This is important for those who do not have confidence in banks, who are afraid of any “freeze”.

But the calculation must be for the long term. During the year, for many reasons, the value of gold fell and jumped. Therefore, the income or loss of specific buyers depends on the period in which they purchased the metal. The cost of bullion is very dependent on this dynamics of world gold prices. In general, over the next few years, there is a possibility of further growth of gold quotes above $2,000.”