Russians Seek Safe Haven for Gold Savings After Ruble Collapse

Russians are buying more gold as they try to protect their savings after Vladimir Putin’s invasion of Ukraine caused the ruble to collapse and new restrictions made it harder to buy foreign currency or leave the country.

Rising domestic demand for physical gold prompted the Bank of Russia to suspend its purchases from banks to ensure there is enough supply for local buyers, the lender said on Tuesday. The elimination of the 20% value added tax on metal purchases has also stimulated transactions, he said.

The nation’s largest bank, Sberbank, said last week that demand for gold and palladium had quadrupled, and it planned to increase the number of offices selling the precious metal to “help people protect their savings”.

“There have been bank runs in Russia since the start of the war in Ukraine and Western sanctions, with the population withdrawing their depositsKsenia Mishankina, a research analyst at Loomis, Sayles & Co., said in an email.The Russians are seeing gold as a safe asset where they can put their savings.”

The metal has a long history as a haven against tough economic times, particularly when there are concerns about the safety of local cash. The near-universal acceptance of the metal as an asset makes it equivalent to foreign exchange at a time when governments limit access to other currencies.

The central bank lost access to almost half of its foreign currency reserves after an asset freeze was imposed as part of economic sanctions aimed at punishing Moscow for the invasion. It can still access gold and yuan reserves, but sanctions make it difficult for the central bank to trade gold. The Bank of Russia recently started buying gold after a two-year pause.

Russia imposed a series of measures to stem the ruble’s decline, including raising interest rates to 20%, and a temporary ban on banks selling cash to citizens who don’t yet have FX accounts and limiting transfers abroad.

Still, the currency has fallen by a third so far this year, fueling one of Russia’s biggest inflation spikes this century.

Earlier this month, the London Bullion Market and the CME Group suspended all Russian refiners from their accredited lists, amounting to a ban on the country’s newly minted bars from entering the world’s top two markets. That means the Russians could face restrictions on where they can resell their metal if one of the country’s purifiers has to re-smelt it.