“Owning precious metals also protects against devaluation of the ruble”
On the Chicago Mercantile Exchange, quotes for April gold futures exceeded $2.1 thousand per troy ounce (corresponding to 31.1 grams). This became a record value for the most popular precious metal in the world. Moreover, the rise in gold prices continued for five trading sessions in a row. Why investors have increased interest in the metal, which is considered a “protective asset” and is mainly in demand in times of crisis, and whether it is time for Russians to buy gold to preserve their savings, experts told MK.
There are enough reasons for the rise in gold prices — from geopolitics to the decisions of American financial authorities. As Freedom Finance Global analyst Vladimir Chernov pointed out, firstly, tensions in the Middle East and the recent damage to the Internet cable in the Red Sea, which caused disruptions in the work of social networks, gave additional impetus to the rise in prices for the precious metal: the cost of an ounce reached historical highs just after cable damage. Secondly, gold is also considered a hedge against inflation, and with supply disruptions in the Red Sea and lengthening logistics routes from Asia to Europe and back, bypassing Africa, inflationary pressures are increasing, which increases the investment attractiveness of gold. The third reason for the increase in the price of an ounce is that world central banks have increased the volume of purchases of physical gold to diversify their gold and foreign exchange reserves (GER) against the backdrop of the precedent with the freezing of Russian assets, since physical gold, unlike currency, is stored within the country. According to the World Gold Council (WGC), in January 2024, 6 major central banks immediately increased their gold reserves by a ton of physical gold or more, despite the fact that there were no significant sales volumes.
The fourth reason for the rise in prices for the yellow metal is the decision of the US Treasury to immediately add $150 billion of liquidity through various financing programs at the beginning of the week. “This money partially goes to the gold market, because the most popular precious metal is the main protective asset: it is purchased precisely in order to protect capital from devaluation, and assets from bankruptcy,” &ldash; says the vice president of the investment company «Golden Plata» Alexey Vyazovsky. The fifth reason for the increase in the price of gold is associated with statements by the head of the American Federal Reserve System (FRS), Jerome Powell, who recently hinted that US rates could be lowered this year. “And rates and gold prices have an inverse correlation: when rates go down, gold prices go up, and vice versa,” “ Vyazovsky added. — The statement by the head of the Federal Reserve provoked increased interest in the precious metal.
For the Russian economy, rising gold prices are very beneficial. Firstly, our country is a major supplier of precious metals to the global and domestic markets. “Large gold mining companies will show strong financial results due to growing demand for this resource,— explains BitRiver Communications Director, economist Andrey Loboda. — And this is good for future production growth and the creation of new jobs.” Tax revenues to the budget from income from gold mining companies will also increase. In addition, for the Russian economy, the rise in gold prices is also positive because it leads to an upward revaluation of the country's gold and foreign currency reserves.
Experts disagreed that it is precisely due to rising prices for the precious metal that Russians should buy — whether the resource itself or shares of mining companies. “Buying gold in itself is not so interesting, but the instrument can be used to diversify a portfolio and reduce overall risk, — says stock market expert «BCS World of Investments» Dmitry Puchkarev. — At the same time, shares of gold miners allow you to make money both from rising gold prices and from the expected increase in dividends.
Another group of analysts calls to observe how the Russian financial authorities act: over the past 15 years, they have been buying precious metals for reserves. “I also advise Russians to purchase physical gold — metal bars or gold coins, because exchange gold or unallocated metal accounts (OMC) in banks — these are someone’s obligations to you, which under certain circumstances can be nullified, — says Vyazovsky. — Compulsory medical insurance, for example, is not included in the deposit insurance system, and if the bank’s license is revoked, no one will return the money invested in this instrument to clients. And when buying coins or gold bars, there is no counterparty risk.”
Separately, it is worth noting ruble prices for gold, which are also growing. The maximum value of 7,200 rubles per 1 gram of 999 gold has not yet been reached, but the level of 6,200 rubles has already been broken. Accordingly, if someone is now thinking about buying a precious metal, then it’s time to do it, because it will be more expensive in the future: prices will continue to rise and may break the previous record, the expert is sure.
The third group of experts points out that that investing in gold — this is a long-term story. “Buy now or not— depends on your investment horizons, which should not be confused with speculative trading, — warns independent expert on the investment market in precious metals Alexander Fedorov. — There is virtually no doubt that over the next 5 years, gold prices will rise.” At the same time, the expert draws attention to the fact that the price of gold in Russia is calculated based on the cost of gold in US dollars and the exchange rate of the American currency to the ruble, therefore, ownership of the precious metal also protects against devaluation of the national currency.