Russians massively buy gold: will it help save savings

– What specific factors contributed to such a sharp rise in demand for precious metals among the population?

Samoilenko: “Currently, there are several factors that stimulate the demand for gold among citizens. First, in March 2022, restrictions were introduced on the purchase of cash currency, and Russians began to invest in precious metals. Secondly, the instability of the economic situation, the rise in prices for real estate and cars, a sharp decrease in the ability to fly abroad on vacation have led to the fact that citizens with free funds began to spend on buying gold (bars and coins) to insure their savings. Demand for precious metals (gold, silver, platinum) was also spurred by the actions of the government, since taxes were zeroed on the purchase and subsequent sale of investment coins and bullion. All these factors are in effect this year, so the Russians continue to buy gold.”

Yusupov: “Gold is a traditional asset in which investors invest their savings. Over the past year and a half, the number of asset classes in which Russians could safely invest their money and savings has narrowed significantly. Now, investments that used to be made in shares of foreign companies, bonds denominated in the currencies of unfriendly countries, are either not available at the moment or carry great risks (freezing, limited liquidity). But gold can be purchased not only in the form of exchange contracts, but also physically. In 2022, several changes were made to the legislation that made it easier for individuals to invest in precious metals. Was canceled 20% VAT and personal income tax on the sale of gold to banks by individuals. For convenience, you can also purchase investment gold coins. Therefore, the lack of a large number of alternatives and attractive conditions for the purchase of gold led to an increase in demand.”

Antonov: “The growth in demand for the precious metal among the population is associated with the possibility of buying bullion from banks by individuals without VAT in the face of sanctions, inflation and the toxicity of the currencies of unfriendly countries. Gold has become an investment asset for Russians.”

Emelyanov: “Firstly, gold in bars and coins is perceived as an alternative to cash currency, that is, as a reserve of valuables in case of large-scale crises in the country. Secondly, gold has been growing in price for nine months, and in rubles even faster than in dollars. Thirdly, it has become easier to buy: the state has expanded sales channels, including through banks, abolished VAT and, at every opportunity, promotes gold as a store of value. People react to it.”

– Can gold be considered an effective investment tool? What profit and dividends can you expect from buying a precious metal?

Antonov: “Gold can be an investment as it is a long-term form of value storage. Investing in gold bars is less profitable than buying gold on the exchange, as there is a risk of theft. If intruders find out about the presence of gold bars in your home, they may try to break into it and steal them. If you have a large number of gold bars, then you need to rent a cell. The big disadvantage of gold bars is the huge spread between buying and selling, which can reach up to 20-25%. How many years do you have to wait to make up the difference? So if your investment horizon is less than five years, then it is better to pay attention to paper gold and buy it through the exchange. And the ideal investment horizon for gold to avoid drawdowns is 10 years. Let’s say that over the past 10 years, the yield of this instrument was 18%. If you learn how to trade, then profitability can be tripled.”

Yusupov: “In a situation where investors are faced with a dilemma – where to invest their savings and savings, of course, gold seems to be a fairly good alternative to investing in foreign currency and foreign securities. I would like to note that gold, rather, in this situation acts as a protective tool. Usually gold in a situation of instability in world markets feels stable, it can even show growth. Given the alarming news background, talk of a recession, the collapse of the US banking system – now is just the right period. In any case, don’t forget to diversify your investments by asset class: don’t invest 100% of your savings in gold too. Gold does not bring dividends, unlike company shares, bonds (coupons) or real estate that is rented out. In the case of gold, one can only count on an increase in its value.”

Emelyanov: “Of course, you will not receive any dividends from gold. Unless you buy shares in gold mining companies. But the rates there have always been modest – about 2-3% in dollars (foreign producers) and 4-6% in rubles. By itself, cash gold gives profitability through the rise in prices against the dollar plus the rise of the dollar against the ruble. Historically, this is about 5 -10% per year in US currency. In rubles, respectively, you can count on 12-15% per annum. But such an effect is obtained with investments for a period of 7 years or more. If the investment is designed for a shorter period, you can not wait for the profit at all.

Samoilenko: “Buying precious metals is a good investment for the long term because gold and silver prices rise over a period of over 10 years. And if the shelf life of such coins and ingots is 20 years or more, then you can subsequently sell them three to four times more expensive than buying. For many, the purchase of precious metals is an investment in a future pension, education of children, if this is planned in 10-15-20 years.”

– Is it possible to consider that gold bars have become an alternative to dollars and euros against the backdrop of sanctions?

Emelyanov: “Yes, this is a currency asset, and at the very least it allows you to cover inflation and even increase your savings. But gold prices are very volatile – much more than currency quotes. And it’s impossible to say with confidence that in the next couple of years you will earn on gold. It’s easier with dollars and euros: they are against the ruble at least once every couple of years, but they really rise in price.”

Yusupov: “Gold, traditionally, has served as money since ancient times. It is a measure of the value of labor and has always served as a means of payment as well as a store of value. Also, gold has liquidity, in addition to the payment and savings function, it acts as a commodity and is linked to stock quotes, expressed in currencies (dollar, euro, pound). In this capacity, gold can be considered as an alternative to the currencies of unfriendly countries. But at the same time, pegging to fiat currencies creates a certain risk: the price of gold in the market may rise, and the value of the currency to which the precious metal is pegged may fall, and vice versa.”

Antonov: “Gold bars cannot completely replace dollars and euros, as they are not generally accepted international currencies. However, buying gold can be used as a form of protection against currency fluctuations in world markets.”

Samoilenko: “Ingots and coins have become not so much an alternative to foreign currency as one of the savings opportunities. If it were not for the sanctions restrictions on the purchase of dollars and euros, then the demand for precious metals would be much lower than we are currently seeing.”

– How many tons of gold will the Russians buy in 2023? Will they set another record?

Yusupov: “We can say that gold is currently an attractive asset. This is facilitated by high liquidity, favorable conditions, low risks, ease of purchase (paper, bullion, coins). If tax breaks continue, then there is every chance to beat last year’s record.”

Antonov: “God only knows how many tons of gold Russians will buy in 2023, as it depends on many factors, including changes in gold prices, the economic situation in the country and in the world, as well as consumer demand. It is impossible to predict the future in this case. Given the growing interest of Russians in precious metals as a form of investment against the backdrop of growing geopolitical risks, one can only assume that the demand for gold will remain at a high level for the time being.”

Emelyanov: “At the current pace, it is likely that sales to individuals will exceed 80 tons by the end of the year. Goznak has received the right to sell bullion, which will make it even easier for the population to buy gold.”

Samoilenko: “It is difficult to say what the results of 2023 will be, because not all Russians are growing incomes. Surely those people who could buy precious metals have already done this, and in the future such purchases will be made by citizens with above-average incomes. For example, now the most popular investment coin “George the Victorious” costs more than 50 thousand rubles – not everyone can buy such coins often, not to mention ingots.”