Russian public bitten by the gold bug

For Russians, whose government is desperately propping up the ruble, gold may soon have the same meaning as hard currency.

Russian banks plan to boost sales of the yellow metal to members of the public this year. Meanwhile, the Russian government is amending its draft Tax Code in such a way as to exempt banks from value-added tax on sale of gold bullion to private individuals.

The amendment, if it goes through, would boost the status of gold as a financial instrument in Russia. At present, Russians have no incentive to sell their gold to banks because, in doing so, they would lose 20% of the metal’s value.

Dmitry Ignatiyev, head of the gold section at the Association of Russian Banks, says the country’s banks could sell about 2 tonnes of gold to the public this year, compared with 400 kg in 1997, because the market is becoming more competitive. He says the market will wane if the aforementioned amendment does not pass. If it does go through, gold sales to individuals could reach 5 tonnes by 1999.

— With files from Interfax News Agency