In 2004, according to goldsheetlinks.com, Russia was the fifth-largest international gold producer after South Africa, Australia, United States, and China.
The Russian president stopped off in Magadan on his way back from a seven-day trip to Asia. Magadan is traditionally Russia's leading gold-extracting region.
Putin also expressed concerns that gold reserves are being depleted, while Russian geologists have been slow to find new deposits.
The president also said that gold is a good investment for Russian citizens, although many are deterred by the 20 percent VAT on buying precious metals. "The reduction of taxes, in particular VAT, on the purchase of precious metals or investing in them is an idea worth considering," Putin said.
Putin said that he supports the idea, advanced by the Nature Ministry, that would allow private citizens to engage in gold extraction and production. He also suggested that Russia's Central Bank should increase the share of gold in its reserves.
His remarks come after reports that the world price of gold reached an 18-year peak at $492.90 an ounce on 22 November, bloomberg.com reported.
Speaking after Putin, Nature Minister Yurii Trutnev said that currently gold extraction is the prerogative of companies. However, he added that illegal prospecting is so widespread that legalization of the existing practice would make sense.
Trutnev said that in 2005 Russia will produce 168 tons of gold. By 2015, he said it will increase production to 250 tons per year.
He also said that his ministry has drastically increased investments in the gold sector from 240 million rubles ($8.3 million) in 2004 to 1.5 billion rubles in 2005. That figure, he said, will likely be 2.1 billion in 2006. By 2010, Trutnev said the ministry will have invested 32 billion rubles into the gold sector.
Private gold diggers will have no access to the large deposits, but mainly to remote and exhausted mines. Trutnev said that he is not expecting a "gold rush" and that citizens still need to obtain a license from the state before prospecting.
Finance Minister Aleksei Kudrin, speaking in Magadan, backed Trutnev and said it would do no harm to allow private individuals to prospect for gold, RIA-Novosti reported on 22 November.