Untapped gold demand in Russia
The World Gold Council has published the report on Russia Gold as, the relevance of gold as a strategic asset Russia edition. The report is focussing on Untapped gold demand in Russia with insight.
The investment market for gold in Russia has remained relatively undeveloped for many years, in contrast to the relatively rapid demand growth witnessed in China and Europe, where demand for gold bars and coins has multiplied more than tenfold in both markets over the last 15 years.
One significant barrier to potential gold market development in Russia is the disincentive created by the hefty rate of VAT (value-added tax) – at 20% applied to bullion bar purchases. But we believe awareness of gold as an asset among Russian citizens is strong and demand for gold would likely grow, particularly if investors had access to a trusted range of products and fair and transparent pricing.
These findings are reinforced by World Gold Council’s consumer research, which also indicates that gold is held in high regard, particularly as a safe haven asset and a reliable store of value.
Russia is considering the abolition of VAT on gold and this is expected to be implemented soon. Recent legislation aimed at tracking gold transactions across the country will help to avoid VAT abuse and increase transparency, while precious metals’ standards and trading practices are being harmonised across local borders. The abolition of VAT will help revitalise the market and unblock the tide in gold investment in Russia.
The experience of other countries – such as China or the EU – shows that removal of VAT has led to a significant increase in gold demand. Market growth may not happen overnight but, when there is a sufficient incentive for investors to return to gold, it can happen quickly and at scale. Since 2010, European private investors have bought over 2,260t of gold bars and coins, currently5 valued at over US$128bn (8.9 trn RUB). The revised tax treatment of gold in Russia, coupled with a supportive infrastructure, might allow its gold investment market to flourish in a similar fashion.