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Russians Turn to Gold as Safe Haven Amid Currency Instability

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Amid declining trust in foreign currencies and financial institutions, Deputy Minister of Finance Alexey Moiseyev advocates for gold as a safe investment alternative for Russians, highlighting a significant increase in gold purchases since the elimination of VAT.


Cash foreign currency has lost its appeal as a safe asset for saving money, according to Alexey Moiseyev, Deputy Minister of Finance of Russia. Speaking at the Moscow Financial Forum, he highlighted the growing reluctance among Russians to trust banks, pension funds, and insurance companies with their savings. Currently, approximately 116 trillion rubles are held as financial assets by citizens, with only half kept in credit institutions. A significant portion, about 24 trillion rubles, remains in cash, reflecting a lack of confidence in financial institutions, reminiscent of the 1990s when people preferred storing money in 'glass jars in the garden.'

As traditional foreign currencies face challenges, Moiseyev suggested that gold could be a viable alternative for those wary of banks. He noted that many banks in Russia are hesitant to exchange old dollar bills or do so at unfavorable rates, mirroring trends in other countries like Turkey. This situation stems from financial authorities' policies aimed at withdrawing old banknotes from circulation due to their vulnerability to counterfeiting. Furthermore, external restrictions have made holding dollars and euros unattractive for both businesses and individuals, leading to increased cash holdings.

Gold has historically been viewed as a safeguard against inflation and economic instability. Investment options in gold have expanded, with exchange-traded funds (ETFs) allowing investors to buy physical gold on the Moscow Exchange without the complexities of brokerage accounts. Additionally, the Russian government has eliminated value-added tax (VAT) on gold purchases since March 2022, further boosting demand. In 2022, gold purchases surged over 14 times compared to 2021, with individuals acquiring around 95 tons of gold in 2023. This trend coincides with rising global gold prices, which have increased by more than a third in the past 2.5 years, currently exceeding $2,730 per troy ounce, driven by strong demand from central banks and expectations of easing monetary policy in the U.S.

Experts predict continued growth in gold prices, with Goldman Sachs estimating a rise to $2,700 per troy ounce by early 2025, while Bank of America suggests prices could exceed $3,000 by mid-2024. The outlook for gold remains positive amid ongoing geopolitical tensions and financial uncertainties, reinforcing its status as a preferred asset for many Russians.

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