It’s time to buy gold: the cost of an ounce on the stock exchange has reached a record

“Ownership of precious metals also protects against ruble devaluation”

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 the price of gold – from geopolitics to the decisions of the American financial authorities. As Freedom Finance Global analyst Vladimir Chernov pointed out, firstly, tensions in the Middle East and the recent damage to an 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 the world’s central banks have increased the volume of purchases of physical gold to diversify their gold and foreign exchange reserves (gold and foreign currency reserves) 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,” says Alexey, vice president of the investment company Zolotaya Plata. 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 Fed chairman’s statement 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 Andrei 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, an increase in gold prices is also positive because it leads to an upward revaluation of the country’s gold and foreign currency reserves.

Experts disagreed about what exactly, in connection with rising prices for the precious metal, should Russians 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 Dmitry Puchkarev, stock market expert at BCS World of Investments. “At the same time, shares of gold miners make it possible to earn 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 in bars or gold coins, because exchange gold or impersonal metal accounts (OMA) in banks are someone’s obligations to you, which under certain circumstances can be reset,” 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 purchasing 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 thinking about buying precious metals now, then it’s time to do it, because it will become more expensive: prices will continue to rise and may break the previous record, the expert is sure.

The third group of experts points out that investing in gold is a long-term story. “Whether you buy now or not depends on your investment horizons, which should not be confused with speculative trading,” warns independent expert on the precious metals investment market 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.