Converting Dollars to Gold

Russian people keep losing their faith in US dollar

It deems that the decade of Russian people’s whole-hearted confidence in US dollar is coming to its end. Years of reforms made people of Russia think that everything might crush, devaluate, turn to dust in a blink of an eye, although packs of green money would remain totally secure. However, an American dollar stumbled on the way of its constant growth. It seems that this will cost it a lot.

However, if a US dollar is not the most reliable way for people to save their money, Russians will have to deal with an inevitable  question – what can serve as a substitute? Is it real estate or land, or cars? However, only a few people in Russia can convert their money the same way as Western common people do, taking into consideration the fact that practically every Russian person has a certain quantity of dollars. In this case Russians pay their attention to everlasting values.

Gold has always been the absolute universal equivalent on account of its chemical peculiarities. In addition to that, gold is the metal that is used in the jewelry industry. The economic boom of Western countries and the targeted policy of American and European banks used to push gold into the background. A dollar became much more important than gold. However, gold managed to keep its position anyway. As it seems, the present time is just the right moment for increasing the role of gold as the universal equivalent.

As a rule, the interest to gold as a way to save money grows little by little. However, the situation changes completely during a crisis or an economic disaster. Bank specialists say that the uneven growth of demand on gold occurs for the third time in Russia. The first time it happened after the crisis of 1998, then - in September of 2001. The third time takes place at present moment. Gold gets more expensive today. The majority of Russian experts think that the reason of such a sudden increase of demand on this precious metal is the same as it is with the growth of the euro rate. The subconscious distrust in dollar is finally finished with its quantity, turning to quality. Yet, according to experts’ estimates, it is the rise of prices on gold, which makes a common consumer react. Common people think like this: if it becomes more expensive, this means that a lot of people need it, so why not joining them? On the other hand, it stands the reason that it is a lot better to buy something when prices go down, not up. If something becomes more and more expensive, it is the best time to start selling it.

Any Russian person can come to a bank and buy some gold there. Banks sell gold in the shape of bars and coins. It is the Russian Central Bank that produces gold coins. There are two kinds of those coins: investment and collectible coins.

Investment coins are not taxed with value-added tax at their purchase, which makes them rather attractive to buyers. It is possible to acquire them in banks, paying the price of metal, as well as the commission fee of up to five percent. If prices go up, one may sell those coins. Sometimes gold prices might experience the fluctuation of ten or fifteen percent within a weekend. However, gold prices might fall and grow rather considerably at times. Gold prices have been growing since 2001 – from $250 to $375 per troy ounce. Advanced “investors” had a good opportunity to gain a lot of profit with the help of that fluctuation. On the other hand, those people, who purchased some gold at the price of  $370 per ounce, were deprived of any profit at the moment. They are forced to hold their investments at the moment, hoping that gold might get more expensive in the future.

However, if someone does not like the idea of being worried over exchange fluctuations, it would be better to choose collectible gold coins. Unfortunately, they are taxed with value added tax, although their price grows with time, covering taxation costs. Yet, one should be a good specialists of collectible gold coins. It is possible to buy the goods of low liquidity, which will inevitably cause a lot of troubles in the future. Only two or three banks work with collectible coins. Selling those coins to onsellers or numismatists  can be rather risky.

Russian Federation Central Bank specialists say that the most popular series of collectible gold coins is Zodiac Signs. The Central Bank is going to increase the output of those coins next year. In addition to that, coins are expected to become 2.5 times larger (they are rather small at the moment). One gold coin of Zodiac Signs series costs 1300 rubles, which is equal to the sum of $40. To crown it all, the Central Bank has something unique to offer as well. There is a unique gold coin, for example, which weighs one kilogram. The coin was issued to commemorate the 300th anniversary of St.Petersburg.

If Russian people do not believe in the all-mighty dollar anymore, if it is too late to buy euros, it is possible to buy some gold. This would be a nice, even a beautiful thing to do. Furthermore, it is possible to convert gold in rubles easily. More importantly, every sold gold coin will help the Central Bank to increase the Russian gold reserve, which has been hidden by Russian authorities in American and European banks right in the middle of another coming global economic crisis.

Kira Poznakhirko

Translated by Dmitry Sudakov

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Author`s name Olga Savka