Gold does not shine: the strengthening of the ruble slowed down investment in precious metals

In the context of a sharp strengthening of the ruble against the dollar, the attractiveness of gold for Russians is declining, Izvestia was told in large credit and brokerage organizations. Since the beginning of the year, there has been an explosive growth in demand for investments in precious metals, which, in comparison with different periods, reached a range of 10-23 times. However, despite the decrease in attractiveness and the expected pressure on the price of gold due to the tightening of the Fed’s policy, experts recommend considering it as a defensive asset during periods of turbulence. But at the same time, do not forget about the rule of portfolio diversification.

Golden Collection

Russians’ interest in gold increased 23 times in the first three months of this year compared to the previous year, Ak Bars Bank said. The largest peak was observed in March. A rapid increase in investments by individuals in precious metals occurred at the beginning of the spring of 2022, the PSB noted. Compared to the same period in 2021, the volume of deposits in bank accounts in precious metals increased tenfold, as did the demand for gold bars. And the demand for investment coins has quadrupled, the bank added. Increased interest in investing in gold in the retail segment since the beginning of March has also been recorded in Sovcombank, and in the MCB – in gold bullion coins. Also, a significant increase in demand for investment in gold was noted in the RSHB, VTB and Otkritie investitatsii.

– In the conditions of high volatility of the financial market, many preferred to shift their funds to a “protective asset” in the form of gold. Also, demand was significantly spurred by the introduction of restrictions on foreign exchange transactions in the Russian Federation, the suspension of trading on the Moscow Exchange, the abolition of VAT at a rate of 20% on the purchase of ingots and the law that allowed citizens to purchase them for foreign currency, the PSB explained.

However, the explosive interest in investments in precious metals began to decline. In the context of a sharp strengthening of the ruble, the attractiveness of gold for Russians is declining, explained Mikhail Vasilyev, chief analyst at Sovcombank. Demand remained high until the end of March – early April, until the USD/RUB rate reached 70, and after that it began to fall, which slowed down retail purchases of gold and silver bars, as well as coins, Oksana Lukicheva, commodity markets analyst at Otkritie Investments, confirmed. By the end of April, the demand for the metal dropped significantly relative to the levels of March, but still outperformed last year’s figures by half, estimated in the PSB.

During a period of high volatility – in the first ten days of March – the ruble exchange rate fell to 126 per dollar and 135 per euro. After that, the national currency gradually strengthened and by the third decade of May it is trading at more than twice the price – about 56.1 and 58.1 rubles, respectively.


Protective asset

However, despite the decrease in the attractiveness of gold and the expected pressure on its value due to the tightening of the Fed’s policy, experts recommend considering it as a defensive asset, noting now a good opportunity to enter this market. Gold is one of the most reliable assets in a crisis, said Kirill Komarov, head of the investment analytics department at Tinkoff Investments. Its main advantage is a limited supply, which does not allow the precious metal to depreciate. In addition, this asset is weakly correlated with the stock market, which is strongly corrected during periods of economic recession and crisis. On the horizon of five years or more, it overtakes inflation, which is important to protect savings, the expert summed up.

— Taking into account the geopolitical situation and the collapse of the ruble exchange rate in March, investments in gold in 2022 are relevant. In addition, it can be expected that due to the blocking of half of Russia’s gold and foreign exchange reserves, the central banks of many developing countries have increased demand for the metal, which means that this factor will push prices for it up for a long time to come,” Natalya Milchakova, a leading analyst at Freedom Finance, predicts. . — We estimate the growth potential of the stock price of the metal this year at $2,000 per troy ounce.

The recommended share of “gold” investments should not exceed 10-20% of the total portfolio, said Stanislav Duzhinsky, an analyst at Home Credit.

Experts generally recommend not to forget about the “golden rule” and always diversify investments by combining the instruments offered by banks and the exchange. For example, shares of exporters, deposits at double-digit rates. Now the main task of a conservative investor is to fix a high interest rate for a long time, says Grigory Sosnovsky, director of the regional network for working with wealthy clients of BCS Mir Investments: in this scenario, long-term OFZ issues become relevant. Their current yield to maturity is slightly more than 10%, which, in fact, are not competitive with deposits. But some of them, by the end of 2024, due to the growth in the cost of the bond itself plus coupon income, can show a yield of about 15% per annum, the expert concluded.

The greatest demand among individuals is measured gold bars from 100 g to 1 kg and investment coins, noted in the surveyed financial organizations.

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