Russian bank buys gold

Russia's state-owned bank Promsvyazbank recently acquired a large amount of gold Purchased. This was confirmed by the deputy finance minister of Russia, Alexei Moiseev on Tuesday following an article in the Russian newspaper Kommersant. The newspaper wrote that the bank recently bought 23 billion rubles worth of gold. That is an amount of €313 million, which equates to a volume of 7 to 8 tonnes of gold on the local market.

Russian Minister Moiseev confirmed that the state-owned bank has purchased gold, but did not comment on the amount of gold. In a statement to the press, he said that the bank has become active in the gold market "to be able to serve a new niche market". It seems that this bank is preparing to sell precious metals to private individuals.

Russia opens gold market to private individuals

Last week, a new law was passed in Russia to reduce VAT on gold scrape. As a result, a tax of 20% on the purchase value of the precious metal will be abolished and it will be interesting for private individuals to buy gold. This means that a new market will emerge for investment gold in Russia.

The Russian banks that have been most active in the gold market in recent years are Sberbank and VTB. For these banks, this mainly concerns the purchase of gold from the mines and the export of gold abroad. There was no domestic market, because it was not attractive for consumers to buy the yellow metal all that time.

It is very likely that Promsvyazbank has stocked up on bullion to meet domestic demand, but we can't confirm that yet. According to figures from the World Gold Council, the gold market of Russia currently has a size of only 3 tons on an annual basis. According to various estimates, this volume could eventually rise to 50 to 100 tonnes on an annual basis if VAT were to be abolished.

The Russian central bank has bought up a large part of the domestic gold mine production in recent years. As a result, Russia's gold reserves have risen from around 400 tonnes to almost 2,200 tonnes since 2006. No other country has stockpiled so much gold in the same period.