CHI is a symbiosis of an investment and banking product that allows you to earn not only on the growth of the metal, but also on devaluation. What are the advantages and disadvantages of such an investment?
One way to save money is to invest in precious metals.
Someone prefers to buy them in the form of bars or coins, however, physical storage and subsequent sale of precious metals are accompanied by costs. A more common option for investing in this instrument is accounts in precious metals. What is it and what are the benefits of such investments?
Impersonal metal account (OMS) – what is it
Accounts in precious metals (hereinafter also referred to as unallocated metal accounts) are accounts that involve the purchase of a certain amount of metal at the bank’s rate. The physical transfer of the metal, as a general rule, is not carried out, unless the metal is requested by the client. The amount of the acquired asset in grams is fixed by the bank.
For the purposes of this article, we use the concepts of ” precious metal account” and ” impersonal metal account” as equivalent, despite changes in the current legislation of the Russian Federation.
In most cases, they are opened in gold (AU) and silver (Ag), less often banks offer to open in platinum (Pl) or palladium (Pd). Profitability depends on the dynamics of exchange quotations for the purchased metal.
If the value of gold on the exchange rises, the price of the asset you purchased also increases.
The amount of assets on an impersonal metal account can be increased by purchasing additional metal. You can also sell it at any time. If necessary, you can open another account in another metal for diversification.
The value of the asset is determined in Russian rubles; purchase and sale transactions also take place in the national currency. The contract may provide for the option to reclaim the physical metal, but this option usually comes with a fee.
Some sources indicate that an unallocated metal account is similar to a bank deposit. However, there are significant differences between these products, including in terms of the formation of profitability (for a deposit it is fixed, and for a metal it is determined by the market rate of the metal) and termination conditions (you can terminate the CHI agreement at any time by fixing the current profitability).
CHI can be perceived as an investment and banking product.
In Sovcombank, you can open an account in gold and silver weighing from 1 (one) gram. Account maintenance is free.
Who can open an OMS
A basic depersonalized metal account can be opened by persons with full civil capacity. They can be divided into the following categories:
- citizens who have reached the age of 18;
- persons at the age of 16, declared fully capable, carrying out labor or entrepreneurial activities;
- persons under the age of 18 who have entered into marriage;
- citizens aged 14 to 18 years with the consent of a legal representative;
- in the interests of minors aged 6 to 14 years – legal representatives: parents, adoptive parents, guardians;
- in the interests of an adult, an agreement is concluded on the basis of a notarized power of attorney confirming the relevant authority. Powers may extend, among other things, to the disposal of an asset.
Restrictions on the minimum weight of the metal required to open an unallocated metal account are different in different banks. In Sovcombank, you can open an account in gold and silver, and the minimum weight of the metal is 1 gram.
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What metal to choose for earnings
Gold, silver, platinum and palladium are suitable for investing. The dynamics of their prices depends on the current economic situation and market conditions.
The charts of price movements of individual metals remain approximately identical. During the period of soft monetary policy of the world’s leading central banks, the cost increases, during the period of tightening, it decreases.
You also need to take into account the properties of metals, demand in the global economy and their demand in production. Gold is predominantly a store of value, a safe haven to protect assets during a crisis, less is used in production.
Palladium is actively used in car catalysts and for industrial operation. Given the increase in the number of vehicles and population growth, palladium prices may rise faster than other metals.
Also, when choosing a metal for making money, you need to take into account the risks. The political and economic situation in exporting countries needs to be monitored, as supply disruptions or bans can lead to price increases due to supply shortages.
How to earn on such an account
The dynamics of prices for metals in the absence of crisis situations in the economy remains stable. Demand usually balances with supply. At the same time, the cost of metals wins back inflation.
The dynamics of dollar prices for gold is multidirectional. In 2011, it reached a historical maximum, and updated it only in 2020. In 2021, with the growth of shares and other exchange-traded instruments, gold in dollars showed a negative trend. At the same time, in rubles, gold showed growth in the indicated period. As of July 15, 2011, the cost of gold was 1436 rubles, as of April 29, 2022 – 4297 rubles.
It is also important for a bank client to take into account that spreads (the difference between the purchase and sale prices by the bank) differ depending on the type of metal.
Gold is the most liquid, spreads are the least there. In second place is silver. Platinum and palladium are the least profitable in terms of spreads: the difference can reach several percent.
The second format of earnings on an impersonal metal account is the devaluation of the ruble. Traditionally, precious metals in the Russian Federation are sold for rubles. Prices are pegged to US dollars. Therefore, even if the price of gold in dollars remains unchanged, and the ruble devalues against the dollar, the value of your asset increases.
At the same time, a situation is possible when the ruble strengthens against the dollar, while the price of gold in dollars remains unchanged. This reduces the value of your asset.
Thus, investments in precious metals should be perceived as saving money, which is useful in times of economic crisis, and not as a guaranteed means of earning. The devaluation of the national currency also helps to make money on this.
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CHI taxation
In the context of earning on an impersonal metal account, taxation issues must be taken into account. Its size is determined by the term of the product, as well as the amount of investment.
If you terminate the contract before the expiration of three years, then you will need to file a tax return and pay personal income tax in the amount of 13% if the profit after closing exceeds 250 thousand rubles. A smaller amount is not subject to taxation.
Pros and cons of OMS
Pros and cons can be considered both in comparison with the storage of a physical precious metal, and in general as a savings and investment instrument. In comparison with the physical metal, it should be noted:
- OMC is a handy tool that can be quickly implemented without touching the physical metal.
- CHI does not require the cost of storing physical metal, for example, in a bank.
- The purchase of compulsory medical insurance, unlike coins and ingots, is available with a metal weight of 0.1 grams, in Sovcombank – from 1 gram.
Advantages of CHI as an investment and savings product:
- Comfortable tax regime. After three years of operation of the account, income is not subject to personal income tax, and if you close it earlier, the tax is payable only on profits over 250,000 rubles.
- Devaluation protection. In the event of economic shocks, metals will provide you with protection against the depreciation of the national currency. You do not have to panic buy foreign currency at not always favorable rates of foreign exchange offices. You can close and open a position, increase or decrease the size of an asset at any time, choosing a good moment within the economic situation.
Disadvantages of CHI as an investment and savings product:
- Not all banks will be able to get metal in its natural form with compulsory medical insurance. Only a few organizations offer this service. And it will be more expensive than just buying it on a metal account, since the transaction is accompanied by a commission for the ingot received.
- The price is tied to the current exchange rate of the interbank market, which is formed from the price of gold or silver in dollars per ounce and the current exchange rate of the ruble/dollar pair. However, it will not be possible to sell it exactly at this price: banks set spreads (“fork” between buying and selling), which can reach several percent.
- Money is not insured by the Deposit Insurance Agency, which means that you take on the risks of bank failure. However, you can quickly sell the metal to the bank, having received rubles to a current account, the funds on which will already be insured in accordance with the current legislation of the Russian Federation.
- In the short term, assets can be a loss. Prices may go down. If you urgently need money, then you will have to sell assets at current quotes.
