The Personal Gold Standard: Strategies for Preserving Savings in an Era of Change

Global Economy and the Need to Protect Savings

Discussions about difficult times approaching for the global economy have been ongoing for a long time. Events such as the worsening situation on the Korean Peninsula, the separation of Catalonia from Spain, and Kurdistan from Iraq will likely impact the exchange rates of the dollar, ruble, and euro.

No one can predict which of these rates will rise, which will fall, or by how much. In this environment, everyone who has savings seeks to preserve them, but the question of 'how?' remains open.

Experts name the creation of a personal gold reserve as one of the most reliable ways to preserve one's funds. They are firmly confident that gold will not fail or depreciate, remaining a stable asset in an era of change.

New Realities: Negative Interest Rates and Growing Demand for Gold

In the banking sector, a complete abandonment of cash and a transition to a policy of negative interest rates (NIRP) is already being discussed. This means that banks will not accrue interest on deposits but will, on the contrary, charge a fee for the storage and servicing of cashless transactions.

This concept, which seems wild, is already becoming a reality, as interest rates on bank deposits are effectively lagging behind inflation. In such conditions, investing in gold becomes particularly attractive for those who want to preserve their savings.

Experts have no doubt: sooner or later, many will understand 'which way the wind is blowing' and will also start buying the yellow metal. And when demand grows, then the price inevitably rises – including for gold. The main thing is to acquire it in a timely manner.

Option 1: Investments in Gold Bars

A modern gold bar is not necessarily an object the size of a brick and weighing 12 kg. Russian banks offer bars weighing from half a kilogram down to 1 gram. For example, a one-gram bar is a plate about a centimeter long and costs around 3000 rubles.

This price makes it affordable for regular purchases, for example, with each salary. Each bar comes with a certificate confirming the metal's fineness, exact weight, manufacturing date, producer, and product number.

Pros and Cons of Storing Savings in Gold Bars

• **VAT on purchase:** The first significant drawback is that the purchase of gold bars is subject to VAT, which increases the cost by 18%.
• **High commissions on sale:** When selling a bar back to the bank, an investor will face a very substantial commission. It can range from 32% (for a kilogram bar) to 43% (for a one-gram bar).
• **Need for multi-fold price growth:** Storing gold in bars will only be profitable if the metal's prices between purchase and sale grow significantly. This happens, but quite rarely, as gold prices usually fluctuate within 15-20%.
• **Storage requirements:** Be prepared for safe-deposit box expenses. Banks meticulously check both the certificate and the bar's appearance. Any scratches, dents, or scuffs can affect the buyback price or even lead to a refusal to buy back.

Option 2: Investment Coins as an Alternative

Another popular way to preserve savings is by acquiring gold investment coins. In Russia, they are minted in quite large editions: from tens of thousands of copies, as with the 'Zodiac Signs' coins, to millions, like the 'Chervonets-Sower' or 'Saint George the Victorious'.

These coins (with the exception of the 'Sower', which replicates the chervonets of the 1920s) bear a formal denomination of 25, 50, and 100 rubles. These denominations do not reflect the coins' actual value but indicate the gold content: 1/10, 1/4, and 1/2 ounces respectively (1 ounce = 31.1 g).

Advantages and Nuances of Investment Coins

• **No VAT:** Investment coins are advantageously different from bullion because they are not subject to tax upon purchase.
• **Price Variability:** Prices for investment coins can vary significantly across different banks. For example, in August 2017, the price for a gold "St. George the Victorious" coin ranged from 21,000 to 27,000 rubles, representing almost a 30% difference.
• **Simplified Buyback:** Banks cannot require any certificates from coin owners during buyback. According to Sberbank's rules, they are obligated to accept coins "regardless of the presence of spots, scratches, traces of oxidation on the coin's surface, or the presence/absence of capsules." This circumstance is very important for subsequent resale of the coins.

However, it is worth noting that not all banks that sell investment coins buy them back. For instance, VTB 24 Bank is one such "seller-refuser".

For banks that both sell and buy back coins, the difference between buying and selling rates can fluctuate. For example, at Sberbank, for transactions involving "St. George the Victorious" gold coins, this difference is about 20%, whereas at RSHB, it can be as low as 7%.

Comparative Analysis: Bullion vs. Investment Coins