Russians buy tons of gold: experts told how to make money on precious metals

“In the last year, we have witnessed an unprecedented gold boom: the population has become actively interested in ingots and coins made of yellow metal. What factors triggered this increase in demand?

Aces: First of all, this is the economic turbulence that was in 2022, when the ruble first weakened against the dollar to 120 rubles, then strengthened to 60, and by the end of the year fell to 70 rubles. This created prerequisites for the population to increase demand for some alternative, protective assets. People could not or did not want to invest in the dollar against the backdrop of sanctions and currency restrictions, and here gold played a very important role. First, the financial authorities abolished VAT on the purchase of gold. As a result, the population was able to buy it without overpaying. Secondly, gold is convenient to store, you can buy it at the bank, take it to the vault and not take any risks. Due to this, the demand for gold has really multiplied.

– There is an opinion that investing in gold can bring not only profit, but also a headache. After all, an asset is considered volatile: the price of a precious metal can grow as quickly as it can fall sharply. So did our citizens do the right thing by starting a massive buying up of ingots and coins?

Ignatov: It must be borne in mind that there are nuances of storing gold itself. Additional costs incurred by the consumer of the precious metal, a private investor. For example, he needs to pay for a safe and a safe deposit box, which are not insured, and therefore, he also needs to spend money on insurance. Of course, you can store gold at home, in a safe. But the house can be robbed, therefore, we return to insurance again, and these are additional costs.

— How has the price of gold and its profitability on the stock exchange changed in recent years?

Viazovsky: For 20 years, the price of gold, by and large, did nothing but grow. But with some kickbacks, of course. The average yield is about 13-14%, but this is the average temperature in the hospital. The record was set last year in March: 8.7 thousand rubles per gram.

– Okay, with ingots – clearly. And if we talk about gold coins, is it profitable to invest in them now? And if so, which ones?

Viazovsky: The most common and popular gold coin is St. George the Victorious, it is minted by two Mints – Moscow and St. Petersburg. They are of completely different weights: from very small coins to three-gram ones. Even pensioners buy them. For example, a Moscow pensioner can afford to buy a coin for 20,000 rubles. Of course, heavy coins, ounce coins, from 100 thousand apiece are “fun” for large investors. The most popular foreign gold coin in Russia is the Austrian Vienna Philharmonic. And this is an inexplicable phenomenon. Austria is not a gold mining country, there are no gold mines there. Coins there are minted from imported gold. But due to the fact that, apparently, they are in the center of Europe, it is convenient to buy from them – in any case, it used to be so. A lot of these coins were brought to Russia, and they are freely traded. Investment coins follow the dynamics of gold prices, that is, if gold grows, the coin rises in price, and vice versa.

— So can gold be considered an effective instrument in terms of investment? What profit and dividends can you expect from buying a precious metal?

Aces: In this issue, one might say, lies the main problem of investing in gold. Gold is an asset that, by its nature, does not generate income in the form of dividends, in the form of some kind of coupons, and so on. Which is really bad, because the investor will have to sell part of the gold if funds are urgently needed, and it’s not at all a fact that at a good rate.

Ignatov: Adding gold to the portfolio of any investor who wants to save money is the right decision. But you need to choose where to store the gold. I think that a more interesting option is to invest in gold on the stock exchange, which is traded.

Will investing in gold help keep money from inflation?

Viazovsky: Statistics show that gold wins back inflation. But I repeat once again: investing in physical metal, in coins or ingots, is a long-term story (it makes sense from three years or more). If you want to speculate in gold, go to the stock exchange, it will cost you less, the commission is lower there.

If you have a planning horizon of more than three years, then you can make money on gold. Personal income tax is not taken if you hold a coin or an ingot for more than three years. And if gold increases in price, the tax does not reduce your profitability.

– Can we assume that gold bars have become an alternative to dollars and euros against the backdrop of sanctions?

Aces: Not every citizen of Russia can afford to buy a gold bar, even a 100 gram one. Therefore, precious metal, of course, will not become an exact alternative. Gold is just a storage tool. As for inflation, I’ll add one stroke. There were developers’ calculations, where the price per square meter was compared with the price of gold. Since 1990, the price per square meter in terms of gold has not changed. That is, the precious metal really allows you to save money, and at the right time, the investor can convert them into something more tangible, such as residential real estate. This is a plus. But in terms of everyday exchange, gold is hardly suitable.

Plus, gold is just a nice asset. When you have an ingot at home, you can touch it, look at it. Of course, no gold on the exchange will give such a feeling.

— How will the demand and prices for the precious metal change?

Ignatov: Everyone loves to say: forecasting is a thankless task. But people who invest in gold need to understand what factors make up the price. We focus on gold, which is traded on the London Stock Exchange, and, accordingly, on the dollar/ruble exchange rate. The future price of gold depends on these two factors. We expect that gold will remain at the same level as it is now (4.3 thousand per gram), or grow up a little – both in dollars and in rubles. At least that’s the forecast for 2023. Regarding demand: it will move if the abolition of VAT and personal income tax is extended. I think that this year people will buy about the same 50 tons as last year.

Viazovsky: Even if gold production in Russia falls due to sanctions, it is still a large volume. Maybe 50 tons will no longer be. But the secondary market will be large, most likely 40 tons.

Aces: I will add more on the pricing of gold in rubles. When does gold go up in price? The first is the global economic crisis: for example, in 2008, world gold prices rose sharply. Or a local crisis, for example in Russia, when the ruble depreciates against the dollar and gold in rubles also grows. During crises (either global or Russian), there is usually a very good result in terms of profitability. Keep for five years or more. If a person is tuned in to profitability, then he will receive it in such a period. In recent years, by the way, the crisis in the global economy has been accelerating, and therefore, there is always a stimulus for the growth of gold prices. Perhaps further we will see a global recession and again a rise in the price of the precious metal. I would now even increase the share of gold in the portfolio to 20-25%.

How can you make money with gold? It’s just a piece of metal, albeit an expensive one…

Viazovsky: This “piece of metal” has been serving mankind for more than three thousand years. The first gold coin was minted in 700 BC by some Greek state. We have two main periods of high demand for the metal in the world: this is the Chinese New Year and the Indian holiday Diwali, when one and a half billion people in China and India buy jewelry gold. It can be said that gold has simply become embedded in the cultural code of mankind and accompanies various events in the life of almost everyone: weddings, anniversaries, bride price. This is not just a piece of metal, but a sacred piece of metal. It is widely used in the jewelry industry, and just in industry.

Aces: Gold is also used in microelectronics and medicine, in medical equipment. And now the demand in microelectronics is growing. So, I agree: gold is not just a way of saving.

— Does it make sense for a citizen with an average income of 100-150 thousand rubles to buy and invest in gold?

Ignatov: This is a good average income, judging by Russia. Yes, of course, citizens with such an income need to buy gold. After all, you need to save money for the future and diversify your portfolio at the same time. It must contain gold, securities, cash, a deposit…

Viazovsky: When I had not yet worked in this industry and had just graduated from the institute, I bought (for the first prize) coins of St. George the Victorious. Since then they have risen in price five times. At the same time, I did nothing: they just lay there. This is an investment for the lazy. Therefore, with a salary of 100 thousand rubles, you can buy a coin worth 20 thousand rubles calmly. And just this will fit into the parameters that were voiced by a colleague, a portfolio of 25-30% of gold.

Aces: Let’s be honest, gold is a store of value. It is necessary for people who have something to save. In the case of citizens who actually receive 35,000 rubles a month, the situation is probably different: there people are dragging from paycheck to paycheck and they are clearly not up to golden “toys”.

– But if we are talking about jewelry, maybe it is better to invest not in gold, but in diamonds?

Viazovsky: No, not better. Because gold is a standardized product. If we are talking about coins, then they are all the same, they were minted in millions of copies. If we are talking about some exchange-traded products, then there are also standardized contracts of a certain volume, and participants have obligations to set quotations for buying and selling. There is none of that for diamonds. These are all different stones, with different facets. Now they are trying to make it an investment product, but it seems to me that nothing will come of it.