Currency depreciation, inflation fears and falling wages are weighing on average Russians and leading them to buy gold and silver bullion and some are making “unusually large purchases” of gold jewellery.
A large Russian chain of jewellery stores, Adamas, with 250 outlets across the country saw “same-store sales climb 40 percent in December,” according to a report from Bloomberg.
The role of gold as a store of value in times of high inflation is well known to Russians. “Many are still scarred by the memories of the ruble devaluation of 1998, which sent the annual inflation rate over 100 percent several months later” according to Bloomberg.
However, with the price of Russia’s main exports – oil and gas – stabilising at lower levels, the rouble has also stabilised following a collapse of 46% last year. Gold has since retraced some of its gains and now trades at 70,000 roubles – up from below 45,000 in June 2014.
However, the crisis does not look like ending any time soon. People in Russia continue to struggle. Real wages have declined 9.9% in February when compared to the same time last year. The Russian government is projecting a 3% contraction in the economy this year.
Bloomberg report on how for Avito – Russia’s largest classified ad website – business is booming as Russians buy and sell used goods to raise cash and make ends meet. It has seen a 43% increase in goods for sale since the crisis began.
Canned food businesses are also thriving – sales are up 10% – suggesting that Russians fear sustained crisis and potential supply chain disruptions. War frequently leases to supply chain disruptions and shortages of food, energy and staples.
Russian people suffered many economic crises over the course of the past century and the protective function that gold can play is understood by many.
The depreciation seen in the ruble is likely to be seen by other fiat currencies in the coming months and years as competitive currency devaluations and currency wars intensify.