Updated August 14, 2008

In 1H 2008

the banks fixed the record growth of unallocated bullion accounts' volumes, as the interest of physical entities grew six-nine times, bankers state.

Private investors seek salvation in gold and other precious metals

from high inflation and the stock marke t's crisis.

The Savings Bank of Russia published its statistics of the sales' volume of the unallocated bullion accounts (UBA) in 1H 2008. According to this data, in one of the bank's territorial branches, in Zabaikalsk, UBA's sales grew nine times as compared to the analogical period l ast year.

The sales' volume of gold in bars has almost tripled.

Other banks as well

mark private investors' high demand for precious metals.

So, in the Bank of Moscow reported that the volume of UBA's sales grew six times this year.

And in NOMOS Bank and in Uralsib Bank mark the growth of interest in gold as well.

Gold, along with other precious metals, becomes a popular instrument for investments because of the stock market's growth deceleration, as well as the stagnation of the real estate sector, experts state. Private investors started to show high interest in the investments in precious metals last year, when prices on them started to grow rapidly.

According to the Bank of Moscow head of operations with precious metals department Vyacheslav Vasiliev, from August, 2007 to March, 2008 the gold's price grew by almost 60%, from $650 to $1030 per ounce. According to the data of the Center for macroeconomic researches of BDO Unikon Company, in 2007 the bullion accounts were the most profitable instrument of savings for the population.

As per the analysts' calculations, they demonstrated the real ruble profitability of 13,7% level. The rapid price rise for gold boosted it up, and it totaled 26,4% in the ruble equivalent, or 37% – in the dollar equivalent.

Since spring of the current year, prices for metals have started to correct, and since early year the gold price fell by 1,5%. Nevertheless, this instrument's real profitability is still higher than of the equity market or banking deposits. So, in July UBA lost 1,02% because of the quotations drop of precious metals, but their real ruble profitability, on an annualized basis, yielded to the investments in the Moscow real estate only and totaled 14,32%. At the same time, since early year RTS index (Russian Trading System) has lost 24,58%, and MICEX index (Moscow Interbank Exchange) has fallen by 22,46%.

The long stock markets' drop made the investors look for a defense for their investments, experts mark. "The economic situation has foremost influenced on the investors' behavior: the inflationary expectations, as well as the instability on the currency and stock markets", Uralsib Bank top-trader on operations with precious metals Valery Okulov explains.

According to him, precious metals is one of the most convenient instruments for investments and "is more reliable, than the stock or currency market".

Some shareholders of mutual funds took advantage of it, as since early year the facilities outflow had exceeded RUR 10 billion here.

"During the facilities outflow from the mutual funds, gold was one of the alternative instruments of investments", Alfa Capital managing company chief executive Mikhail Khabarov considers.

In August the interest in UBA has somewhat reduced, Mr. Vasiliev states. He explains this by the correction of prices for metals: since early month, the gold's price has fallen by almost 12%. However, the price drop will result in

the new revival of interest in the investments in gold, experts consider.

"Investors have a good opportunity to buy at the quite attractive levels", Mr. Okulov says. Aleksey Yashin, Ingosstrakh Investments managing company director for operations with alternative investments, agrees with him. "The market's fall has not stopped yet, and investors want to protect their facilities from a crisis situation".