Russian c.financial institution halts purchases of gold from banks to fulfill family demand

An worker processes ingots of 99.99 % pure gold on the Krastsvetmet non-ferrous metals plant within the Siberian metropolis of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

March 15 (Reuters) – The Russian central financial institution mentioned it’s going to droop the shopping for of gold from banks from Tuesday to fulfill elevated demand for the dear metallic from households, its newest try to climate the storm on Russian markets within the face of Western sanctions.

“At present, households’ demand for getting bodily gold in bars has elevated, pushed, particularly, by the abolition of value-added tax on these operations,” the central financial institution mentioned in an announcement.

The central financial institution raised the important thing price to twenty% from 9.5% on Feb. 28 because the rouble crashed to document lows and other people rushed to withdraw cash from banks after the West imposed unprecedented sanctions in opposition to Russia for what the Kremlin calls a “particular operation” to disarm Ukraine. learn extra

The central financial institution, which can subsequent meet on charges on Friday, has additionally been holding day by day repo auctions as lending establishments scramble to handle their liquidity.

The financial institution mentioned it could droop its gold purchases from banks from March 15, with out saying how lengthy the change would final.

Sanctions have lower Russia off from key components of world monetary markets and have frozen practically half of the nation’s $640 billion gold and international change reserves, triggering the worst financial disaster because the 1991 fall of the Soviet Union.

Analysts from VTB Financial institution mentioned the central financial institution’s resolution appeared logical, given the lack of entry to $300 billion of its reserves meant the share of gold in obtainable reserves had risen to 40% from 21%.

“With the objective of diversifying the central financial institution’s reserves, in the intervening time there isn’t a sense in increase reserves in gold,” VTB analysts mentioned.

They added that the banking sector’s structural liquidity deficit had narrowed to lower than 4 trillion roubles ($36 billion) by the beginning of this week from a document 7 trillion roubles, which means the acute section of liquidity deficit has handed.

On this scenario, it now not made sense for the central financial institution to purchase gold from banks to take care of liquidity, VTB mentioned.

BCS analysts mentioned residents shopping for valuable metals would assist cut back the amount of money flooding the financial system, additionally serving to banks’ liquidity.

($1 = 111.0170 roubles)

Reporting by Reuters; Modifying by Emelia Sithole-Matarise

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