By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – March 25, 2022
The Russian central bank, ten days after its decision to suspend the purchase of gold from Russian commercial banks to meet the demand of the population for this asset, resumes these operations.
“In order to ensure a balance of supply and demand in the domestic precious metals market, the Bank of Russia will buy gold from credit institutions at a fixed price from March 28, 2022. The price from March 28 to June 30, 2022 inclusive will be 5 thousand rubles per 1 gram,” the Central Bank said in a statement.
“The established price level allows us to ensure a stable supply of gold and the smooth functioning of the gold mining industry this year. After this period, the purchase price of gold can be clarified taking into account the emerging balance of supply and demand in the domestic market“, explained the Bank of Russia.
The last accounting price for gold, according to the Bank of Russia, exceeded 6 thousand rubles per gram.
From March 15, 2022, the Central Bank suspended its purchases of gold from credit institutions in order to create conditions for meeting the demand of the Russian population for this precious metal, amid domestic ban on cash withdrawals in dollars and euros and falling ruble.
The Bank of Russia resumed buying gold in the domestic precious metals market on February 28, 2022, almost two years after the suspension of these operations. The regulator suspended the purchase of gold on the market from April 1, 2020.
The Russian central bank also announced that from March 28 to June 30, 2022, it will buy gold from Russian banks at a fixed price of 5000 rubles per gram, which is less than $ 1800 per troy ounce.
A number of Western countries at the end of February 2022 imposed sanctions on operations with the Bank of Russia and the Ministry of Finance of the Russian Federation, limiting Russia’s ability to use part of the gold and foreign exchange reserves. On the eve of OFAC (a division of the US Treasury) explained that transactions with gold from the reserves of the Russian Federation fall under previously adopted sanctions (that is, operations with this asset carry sanctions risks for counterparties). The Central Bank said that all the gold from the international reserves of the Russian Federation is in its vaults in Russia.
On March 1st, the United States issued a directive prohibiting Americans from any transactions with the Bank of Russia, the Russian Federal Ministry of Finance and the Russian National Welfare Fund (NWF). Similar decisions were announced by the UK, Japan, Canada, and Switzerland.
Earlier, on February 28, the European Union approved the decision to freeze the assets of the Central Bank of the Russian Federation. Freezing of international reserves of the Central Bank of the Russian Federation was also included in the sanctions package of Australia.
Since 2014 Russia has more than doubled the amount of gold in reserves. Also, the Bank of Russia was the largest consumer of gold in the country. Russia was the second largest producer in the world in 2020 and accounted for 9.88 per cent of total global production, with 331.1t of mined gold. Russia’s international monetary reserves rose by $3.6 billion from February 21 to 24, reaching a new all-time high of $643.2 billion.
At the end of January, the value of monetary gold in Russia’s international reserves was $ 132.26 billion, the share of gold in reserves was 21%.
Read also : How to invest in gold
In the situation of the deep shock of foreign exchange liquidity that the Russian banking system is now experiencing, gold will once again serve to store value and protect wealth against inflation. Demand for gold from Russian citizens has increased since the start of the military operation in Ukraine on February 24.
Read also : Gold production in Russia decreased by 1.3% to 174 tons in January-July 2021
In early March, Russia amended its Tax Code adoptiong a law abolishing VAT on the purchase by individuals of precious metals in bullion with their withdrawal from bank vaults. Previously, the VAT tax rate was 20%.
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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.