Brilliant investment. Is it worth investing in precious metals now?

What happened

Since March 1, individuals in Russia mayFederal Law "On Amendments to Part Two of the Tax Code of the Russian Federation" / Official Internet Portal of Legal Information buy precious metals in bullion without VAT. The initiators of the bill explained the abolition of the 20% tax by the desire to give more opportunities to invest in precious metals, and not in foreign currency.

Decision supported Ministry of Finance:

“Against the backdrop of an unstable geopolitical situation, investing in gold will be an ideal alternative to buying dollars. The American currency is more volatile, subject to various kinds of risks. Because of this, it cannot compete with precious metals,” Finance Minister Anton Siluanov explained.

At the same time, the Central Bank introduced restrictions to buy cash. Of the tools for saving personal finances, there were ruble deposits with an increased rate, foreign currency deposits with the risk of converting into rubles at closing, real estate or protective assets - in fact, metals. The surge in demand for the latest

confirmed several large banks.

Why precious metals are called a defensive asset

Stocks and cash are assets with nominal value. They react to any changes in the economy, and in a crisis tend to depreciate. A piece of metal is always a piece of metal. Its payback is also difficult to predict with absolute accuracy, but it maintains a certain value even in difficult times.

The main types of defensive assets are gold, silver, platinum or palladium. It is believed that the first two metals rise in price during an economic downturn. So, for example, due to the coronavirus crisis in August 2020, the price of gold pierced an all-time high of $2,000 an ounce. The cost of silver is also sharp jumped. After the economy recovered slightly from the shock of the global lockdown, prices for these metals fell. This is their normal behavior. However, if you rewind the charts 10–15 years ago, you can see that even with annual drawdowns, the cost of the same gold is growing. So it is unlikely that it will be possible to quickly make capital on the auctions of these metals, but it is quite possible to save savings.

Platinum and palladium are not so popular with private investors, and there is an explanation for this. These metals are used in industry, so their price is more likely to increase during periods of economic growth. At the same time, the price of platinum and palladium is difficult to predict, because it is influenced by many factors, such as the volume of production and the level of global consumption. But these metals have potential.

What are the ways to invest in precious metals?

You don't have to be fabulously rich to buy a precious asset. You can invest even a few thousand rubles. It all depends on which investment method and bank you choose.

Ingot

Pros:

• It is a physical piece of metal that can be touched and even taken home. You will only pay for the metal, not for its processing.
• Ingots come in different sizes. If you have modest savings, you can buy just a few grams of metal.
• If your investment strategy is conservative and you buy a bullion for ten years, then pay personal income tax you don't have to sell it. In addition, according to the new rules, the sale price of an ingot does not include 20% VAT.
• In the banks you can buy ingots from all four available metals.

Minuses:

• Store the ingot carefully. Before buying an asset from you, the bank will appoint an examination. Even a barely noticeable scratch will reduce the value of the metal.
• Storage in a safe deposit box is not included in the price of the bar and can be quite expensive.
• If you decide to sell the bullion within three years from the date of purchase and its price is higher than the purchase price, you will have to fill out a tax return and pay personal income tax.
• The manufacturer's certificate will also have to be carefully stored for decades. Any operations with ingots without a certificate are illegal.
• Ingots are not sold in every branch. Before buying, carefully study the information about precious metals on the website of the selected bank.

Investment coins

Pros:

• It is as much a physical asset as an ingot. The value of a coin is tied to the price of the metal from which it is made.
• Operations with coins are not subject to VAT. As in the case of ingots, the owner is exempt from paying personal income tax when selling an asset if he has owned it for more than three years.
• A manufacturer's certificate is not required for sale.
• Sometimes numismatists are interested in rare investment coins, so there is a chance to sell your asset to a collector at a higher price.

Minuses:

• The difference between the buy and sell price (spread) is very large. For example, on March 29, 2022, the golden Victorious weighing 3.11 g. Sberbank sold for 27,000 rubles, and bought for 22,000.
• Coins are issued only golden and silver.
• If you decide to sell the coin within the first three years and make money on the transaction, then paying income tax cannot be avoided.

Impersonal metal account - OMS

Pros:

• You are buying "virtual" metal. That is, you don’t have to worry about the storage and appearance of the asset.
• You can buy gold, silver, platinum and palladium.
• You do not need to go to a branch to open a CHI. Banks make it possible to do this through applications.
• CHI is convenient because it allows you to earn on quotes. You can sell grams of precious metals to the bank at any time and receive income.
• If you own virtual metal for three years or more, then you will not have to pay personal income tax on the income received from trading on the growth of quotations.

Minuses:

• CHI is not covered by the deposit insurance system, so if something happens to the bank, you will not receive compensation.
• If you decide to close the account before three years from the date of its creation, then you will have to pay income tax on all income from metal trading.

Metal mutual funds and ETFs

And finally, you can not buy the precious metal yourself from the bank, but use the services of management companies. That is, invest in metal mutual funds or ETFs. Today, however, such a strategy looks rather risky.

What are the challenges and risks to be aware of?

First, it is important to understand that buying jewelry from gold or platinum does not apply to the topic of investing in metal. The price of finished products is usually several times higher than the cost of pure metal. It includes the costs of the store, such as rent and salaries to employees. But in a buying or pawnshop you will be offered a price only for the amount of metal.

Second, metals are a long-term investment. If you suddenly need money, for example, to buy an apartment or medical treatment, the asset will not be able to be used immediately.

Another significant risk is the loss of the “presentation” of your asset: damage, deformation. Or simple theft. Physical metal is best stored in a capsule in a jar. And if you plan to keep the bullion or coins at home, it makes sense to purchase a safe.

In general, risks exist with any investment strategy, and defensive assets are no exception. Therefore, it is worth considering everything well before spending all your savings on buying metal.

Evgenia Mitkevich