Investing in Gold: Factors Affecting the Price and How to Buy and Store It Safely.

IN SHORT:

• In March, the prices of bank shares fell sharply, while the price of gold began to rise.
• There are several factors affecting the price of gold, including inflation and various shocks.
• Gold seller: Investing in gold has gained momentum right now.
• The most popular weight is 1 ounce – for both bars and coins, smaller units are often chosen as well.
• Security is important – the buyer of gold does not need to be told that he has gold.
• It is also important to store gold in a safe place, but it is no less important to remember where it is hidden.

“During the last year, the price of gold has increased significantly and is approaching its historical peak. And it has been there for some time,” Olegs Yemeljanovs, Head of Investments of the Financial Market Division of “Swedbank” emphasized that in March the prices of bank shares, especially in the USA, began to decrease rapidly and at the same time the price of gold began to rise.

“This correlation once again clearly indicated that, although people quite often consider gold as an alternative, non-traditional investment, as soon as financial problems appear or they want to protect their investments from inflation, the demand for gold increases and so does the price. As soon as the situation normalizes, interest is gradually waning.”

Atis Krūmiņš, Head of Asset Management and Pensions in the Baltics of “Luminor”, explained that there are several factors influencing the price of gold. Already mentioned inflation, interest rates, but one of the most important is various shocks. In recent years, there have been several of them – the pandemic, the war started by Russia in Ukraine, and the latest is the problems in the US regional banks.

“There are episodes when the price of gold moves very quickly, and there can be decades when the price can get stuck in a narrower range and even fall. If we look from the 1980s to the beginning of the 2000s, during that time, for 20-30 years, the price of gold moved slowly towards down. As the global financial crisis approached and in the early 2000s, when there was a commodity boom in developing countries, the value of gold also recovered. Then there were a couple of years already during the financial crisis when central banks cut rates and there was global uncertainty about what would happen to financial markets, ” said Krumiņš.

This period was exceptional for the price of gold and new records were reached, increasing several times every year. Currently, the price of gold has risen again.

“Gold currently costs around 2,050 dollars [uncē]. The price of gold has returned to this level for the third time. The last time it was like that was at the beginning of 2020,” said the bank’s representative.

Krumins said that gold is in a way a barometer of what people think about volatility and the expected value of money. Therefore, after large increases in the price of gold, there can also be large decreases.

“A 20-30% drop in the price of gold within a year, judging by historical data, it is completely realistic,” said the commercial bank’s expert.

Kaspars Peisenieks, executive director of the “Investor Club”, said that investing in gold is one of the longest-standing forms of investment in history and that it retains its purchasing power in the long term. Peisenieks emphasized that gold in general is an emotional form of investment or storage of funds, which usually receives more attention in various moments of crisis and security instability. But how and where to buy gold?

“From the beginning, we have to understand the primary purpose why we buy gold. If we buy gold with the idea of ​​speculating on the price increase, then we can buy it through financial instruments, or buy an exchange-traded fund from a broker or bank, which will reflect the price of gold. If the goal is to insure against the overall risk of the financial system, then it will be physical gold. I want to mention that there are a large number of gold investors who fundamentally believe that only physical gold is an investment in gold and the rest are just papers. If you want physical gold, then you really need to think about where you will keep it. You should expect that as soon as you buy gold for larger amounts, you will have to report it, declare the origin of these funds. You should not think that when you buy gold, you will be able to “escape” some money of dirty origin,” Peisenieks pointed out.

In “Tavex Latvia” gold is bought and sold both in coins and in bars by natural persons, private investors. Chairman of the board of the company Andris Arkhipenko said that investing in gold has gained momentum at the moment.

“Of course, the most popular weight is one ounce – both for bars and coins. Smaller units are also often chosen – 10, 20 grams. Or even buy one gram of gold bars. From a security point of view, the main thing is silence, and you don’t need to tell anyone that you have this type of gold. Everyone has to decide for themselves how to keep it. However, gold is special in that a very small coin or bar has a lot of value. A one ounce coin is very close in size to a two euro coin, but the value is close to 2000 euro. Two euro it is probably possible to figure out how to store the coin in such a way that it is as safe as possible,” Arkhipenko said.

The main thing is to store the gold in such a way that after a while you will remember where it is hidden.

Report a bug