Russian nationals have set a record for buying gold in 2022, even exceeding the projections of the country’s Finance Ministry, according to a report by business publication Vedomosti citing sales data from major Russian banks. According to Vedomosti’s estimate, 5 of Russia’s 13 systemically important banks were able to exceed the Finance Ministry’s annual gold sales forecast in 2022 by selling 57 tons of gold.
The five institutions listed in the report are Sberbank, VTB, Promsvyazbank (PSB), Tinkoff Bank and the Moscow Credit Bank (MCB). Total sales throughout the market were even higher: according to the estimates of Oksana Lukicheva, commodity markets analyst at Otkritie Investments, banks’ total gold sales in 2022 will range from 64 to 67 tons.
The Russian Ministry of Finance previously forecast total sales of the precious metal to come in at 40-50 tons by the end of 2022. In 2021, the ministry estimated total bullion sales at 6 tons.
The main reason for the growth is the lack of real alternatives for investment, as well as tax benefits, which were introduced by the Russian authorities in 2022. Russians currently do not pay VAT on the purchase of gold or income tax from its sale, with the latter benefit valid until the end of 2023.
Analysts have pointed out that Russian investors and Russian banks’ premium customers do not have any other serious investment options: the Russian stock market is of no interest, the purchase of real estate amid mass emigration is a questionable investment, and making investments in foreign assets and foreign currency are fraught with risk.
Banks do not disclose revenues from gold sales – some do not publish any statistics on the sale of gold. However, given the price of gold, which averaged 3983 roubles (approximately $57) per gram in 2022, the five banks were able to sell it for about 200 billion roubles ($2.95 billion). State bank VTB, which sold 30 tons of gold, led sales, with Sberbank, which sold nearly 18 tons of ingots and about 2 tons of gold coins, in second place. MCB and PSB, which sold about 4 tons of gold each, shared third place. Tinkoff sold a little less than a ton of the precious metal, but even that figure exceeded the bank’s forecasts.
Market participants believe that an increased demand for gold among Russians will remain in 2023, as for many Russians investing in gold is an alternative to investing in the currencies of so-called “unfriendly countries”. However, these investments involve a lot of difficulties: real profit from the resale of gold can be earned only through a sharp drop in the value of the rouble. In addition, there are risks associated with gold storage – any visual defect instantly reduces its market value, and banks are generally ready to buy back bullion at a considerable discount, which ranges from 15 to 25%.