Panic in Russia as gold purchases soar amid fears of economic collapse

Vladimir Putin is facing a growing economic crisis. (Image: Getty)

Russians are resorting to buying up gold at unprecedented rates to protect their savings, amid fears of economic collapse. The country's economy is reeling from the effects of Western sanctions and the huge costs of financing Putin's war in Ukraine.

Since Putin ordered his full-scale invasion, businesses and consumers have been hit by a double whammy of high interest rates and spiralling inflation. In particular, food prices have contributed significantly to overall inflation, with Russian consumers being forced to spend more money on staple items. Economic uncertainty has increased further with the recent imposition of new US sanctions on Russia's two largest oil companies, Rosneft and Lukoil.

Russians are buying gold in unprecedented quantities. (Image: Getty)

Together, the companies account for nearly half of Moscow's crude oil exports, according to Bloomberg.

The US move caused turmoil on Russia's stock market earlier this week, as shares plummeted amid investor panic.

With no end in sight to the economic turmoil, Russians have turned to gold as a safe haven to protect their hard-earned savings.

Data provided by Al Banyan Tree Research shows Russians have purchased 282 tons of physical gold in the form of bars, coins and jewellery since early 2022. The total exceeds the state reserves of several major European economies, including Spain (281.5 tons) and Austria (279.9 tons).

And Russians are likely to continue gobbling up gold assets, according to the Hong Kong-based research firm. They estimate that they will buy a whopping 62.2 tonnes of gold (nearly 2 million troy ounces) this year alone.

Purchases reached a record 73.7 tonnes last year, following 71.2 tonnes in 2023 and 60.7 tonnes in 2022. By comparison, Russians bought just 34.8 tonnes in 2020 and 46.8 tonnes in 2021.

Russians are eschewing their favoured safe haven options due to the severity of Western sanctions.

“Individuals have historically preferred to invest in real estate and foreign currency, but after the sanctions-related restrictions, currency became a less convenient way to preserve savings, and since 2022, demand for gold has increased,” Dmitry Kazakov, a Moscow-based analyst at BCS Global Markets, told Bloomberg.

He added that Russians may have moved their assets in gold abroad to safeguard them, in another blow for the Kremlin.