/ world today news/ The Russian Bank BTV disclosed data on the sale of gold bars to individuals. Russians continue to actively buy gold, and this fall the demand has become even higher. What caused this gold rush and how else can you increase interest in gold among the population?
Gold sales to individuals in VTB since March last year amounted to 55.5 tons, while demand growth only accelerated this fall. Thus, sales in November increased by 21% compared to October and reached 3.7 tons. And the average volume of one sale has increased by a third since the beginning of the year to 18 kilograms, the bank’s press office said in a statement. The main share of precious metal transactions takes place in Moscow.
What drives the population to buy so much gold? VTB explains that such a volume of investment gold has been sold to individuals since the beginning of its sales without payment of VAT of 20% in March last year. And in October and November, demand for gold accelerated due to the seasonal factor, as well as the buyback option launched by VTB this summer, where a customer can sell the gold in storage back to the bank.
“They canceled not only the VAT on the bullion, but also the personal income tax for two years. Tax preferences are the government’s step forward. The second factor is rising prices. Last week, the troy ounce set a new all-time high of $2,140 and the ruble began to weaken. We have not yet consolidated at a level above 6,000 rubles per gram, but we can meet the end of the year above this mark. When an ounce in dollars appreciates and the ruble falls against the dollar, many investors perceive the purchase of gold not only as a good investment, but also as insurance against a weakening of the ruble. Gold has become more expensive in rubles since the beginning of the year by 30%,” says Alexei Vyazovsky, vice president of the company “Zolotaya Plata”.
Demand for defensive assets such as gold and real estate was boosted by the ruble’s record volatility in the third quarter of this year and continued high inflation expectations, noted stock market expert Yevgeny Mironyuk.
Finally, the sanctions became an incentive to invest in gold.
“A lot of rich people I talk to have been sanctioned, their Western accounts, Western stocks, funds have been blocked and they no longer trust the international banking system. For them, the purchase of a bullion that can be placed in a safe already acquires a special value. I know people who buy tens of kilos of bullion. Before that, it was a rare story,” says Vyazovsky.
“The demand for gold is driven by significant volumes of available funds in investor accounts, combined with a sharp reduction in the number of investment instruments available in the Russian jurisdiction. The turnover of the Moscow Stock 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 is the growth of the money supply by 20.5% on an annual basis, the increase in wages due to shortages in the labor market, and budgetary incentives,” notes Mironyuk.
At the same time, the market for the sale of gold to individuals is developing not only from the point of view of demand, but also from the point of view of supply: the choice is becoming greater both in the line of gold coins and in the line of bars.
Another problem – the large difference between the selling and buying prices of gold bars – is solved by the growth of participants and the competition between them. “If a few years ago in Moscow five or six banks traded in gold bars, now there are already more than 20 banks and several are at the stage of receiving a “golden” license from the Central Bank. Suddenly, “Goznak” fired after being allowed to trade gold in coins and bars with individuals. It can store the metal remotely. In addition, the refineries themselves that produced the bullion were allowed to sell gold. Dealers can also sell coins. Therefore, if you don’t buy back the gold well, the customer will go to another market participant,” says Wiazowski.
In practice, buying physical gold is quite simple: right at the checkout, you can buy a 100-gram bar or a 15-gram coin and immediately receive the precious metal. Some carry the bar in their safe deposit box, others rent a safe deposit box at a bank and store it there.
“There is a problem with cages: our legislation does not protect the owner of the cage. There were stories when thieves opened cells in the vault and the court sided with the bank. For example, the one who vacated the cell before you makes a copy of the key, and if the bank is too lazy to change the lock cylinder, then the thief rents a new cell nearby, enters the vault and opens your cell. There are no cameras inside the vault. You came and found that there was no money or bullion, to which the bank says that it did not see what you put there, “Viazovsky notes.
As for the non-personal metal account or bank deposit in metal, the main problem here is that the prices are not very favorable compared to the quotations of the central bank and the stock exchange, plus these deposits do not fall under the deposit guarantee system, the expert adds. Although VTB noted an increase in demand for non-personal metal accounts.
Mironiuk believes that physical gold is a possession of the wealthy, as it is necessary to take into account the costs of security or renting a safe. “It is much more convenient to invest in gold through NMS, mutual funds and trust management strategies with 100% correlation with the price of gold. There are also instruments with a high correlation to the price of gold, for example shares of gold mining companies. In this case, you can count on both dividends and stock growth when companies generate profits,” says the expert.
In order to further stimulate the demand for gold from the population, Vyazovsky proposed further expanding the assortment and, first of all, reducing the weight of the gold coins. “The minimum threshold for the introduction of gold is a three-gram St. George the Victorious coin, which is worth more than 20 thousand rubles. In the West, one-gram coins are popular: they sell a blister in which one-gram coins are enclosed, so that they can be easily broken off and given to, for example, a child. One gram of gold can cost us 7-8 thousand rubles. The threshold is now much lower and more attractive for the population”, the interlocutor believes.
As for the price of gold, experts expect it to rise. According to VTB’s forecast, in 2024, when global central banks begin to cut interest rates following a slowdown in economic growth, gold prices should start to rise.
“The most optimistic forecast is that next year gold will reach 7,200 rubles. per gram. We had such a historical record in March 2022. And in dollar terms, gold has already set a record of 2140 per troy ounce. Next year, $2,200 per troy ounce in the summer is completely achievable,” Vyazovsky predicted.
Translation: SM
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