Russians on a Gold-Buying Spree

Russians have gone on a gold-buying spree.

According to Russian media reports, investors in the country have bought a record amount of gold since 2014 despite prohibitively high taxes.

In just the last nine months, Russians have purchased four tons of gold bars and gold coins. That’s an 8% increase year-on-year.

Investors in other countries have also been gobbling up physical gold. According to the Sputnik report, Americans have purchased 91.3 tons of gold in just the past nine months. That’s a 79% increase. Gold-buying is up 54% in China (the world’s biggest gold consumer) and 24% in India.

Russians have been buying gold despite a prohibitively high value-added tax (VAT) of 20%. That’s a primary reason why there is such a big gap between physical gold investment in Russia and other countries. But the growth in demand despite the highest VAT in the world reveals a strong appetite for gold among the Russian people.

That big barrier disincentivizing Russian gold investment might be coming down soon, paving the way for an even bigger increase in Russian gold demand. The government has been considering repealing the VAT on gold as part of a broader program to support Russian gold demand. The VAT repeal could happen as soon as 2022.

The Russian government has also been bullish on gold in recent years. A report from the Russian central bank earlier this year revealed the country held more gold than dollars for the first time ever.

Before ending its purchase program last spring at the onset of the coronavirus pandemic, Russia was the biggest central bank buyer of gold. The Central Bank of Russia bought $4.3 billion worth of the yellow metal between June 2019 and June 2020.

But the Russians were buying gold long before that. The Central Bank of Russia bought gold every month from March 2015. According to Bloomberg, “Russia spent more than $40 billion building a war chest of gold over the past five years, making it the world’s biggest buyer.”

In February 2018, Russia passed China to become the world’s fifth-largest gold-holding country.