Saving in gold

Investing in gold

Diversification

An effective way to hedge risks such as inflation

Gold has preserved its value for thousands of years and its value does not depend on the creditworthiness of its holder. Unlike equities, gold has historically performed well during periods of financial turbulence and is therefore a suitable tool for investors to diversify their portfolios and a source of liquidity. It helps them manage the risks associated with other financial assets and plays a key role in building a balanced and more stable portfolio.

Liquidity

A flexible and accessible choice

The perception of gold as a cumbersome and immobile asset does not reflect the reality of today’s gold market. Gold flows freely and more than 180 billion dollars worth of gold changes hands every day, which significantly exceeds the volume of many major financial assets. Thanks to its liquidity, gold is useful both in times of expansion and recession. If investors hold illiquid assets that are difficult to sell, they can still use gold to meet their most immediate needs.

Return

A proven asset with competitive performance

Since 1971 the returns on gold have been similar to those on equities and have outperformed bonds. Over the last twenty years gold has outperformed most major asset classes and global investment demand for gold has grown on average by 15 percent per year. Gold has historically preserved its value thanks to its dual nature, as it is perceived both as a consumer good and as an investment. Unlike fiat currencies, gold cannot be printed, only mined. This fact largely explains why it has consistently outperformed all major fiat currencies.

History of gold

Gold was discovered by the ancient Egyptians more than four thousand years ago. Over the centuries this precious metal has been used as a store of value and a showcase of wealth. In modern times the demand for gold has expanded into industrial use, especially in electronics manufacturing.

As with many commodities, the price of gold is heavily driven by supply and demand dynamics. Nevertheless, the yellow metal is also seen as an investment asset that preserves its value over centuries. Some investors trust in its quality and use investment gold as a hedge against inflation and economic uncertainty.

Gold is denominated in US dollars, which means that it has an inverse relationship to the dollar. A strong dollar against other currencies weighs on the price of gold because it becomes more expensive and therefore less attractive for foreign buyers. Conversely, when the value of the dollar declines, it supports demand for gold.

Investment gold can be bought as physical bars or traded through financial derivatives. Some investors prefer exposure through shares of gold mining companies or exchange traded funds linked to gold (ETFs).

Banks and the jewellery industry in 2022

Gold has become a popular trading asset on Wall Street. Many traders remain uncertain after the meetings of the Federal Reserve, waiting to see how quickly the US authorities will be able to contain further banking shocks. The global economy, after several downturns in the previous year, has reached an inflection point. Central banks have been the main driver, intensifying their strong campaign against inflation. This interaction between inflation and central bank interventions strongly shapes the outlook for 2023 and the performance of gold, including projections and forecasts of the gold price.

The consensus view on the economy predicts slower global growth, comparable to a short and possibly localised recession, further declining but still elevated inflation, and an end to interest rate hikes in many developed economies.

Global central banks

Central banks are buying gold at an unprecedented pace, especially in China, Turkey and India. This trend has been accelerating. In order to diversify their foreign exchange revenues and reduce their dependence on the US dollar, central banks have been increasing their gold reserves for the last 13 years. The World Gold Council reported that the total volume of gold purchased by central banks in 2022 reached 673 tonnes, surpassing all annual totals since 1967. Global central banks bought around 400 tonnes of gold in the third quarter of 2022 alone, which is a massive increase. The World Gold Council has kept data for this sector since 2000 and this level of demand is more than double the previous record from the third quarter of 2018.

The People’s Bank of China stated in November 2022 that it had purchased 32 tonnes of gold at roughly 1,650 dollars per ounce. It was the first time since September 2019 that the central bank reported a change in its gold holdings. In 2023 this pattern is expected to continue, which could support further growth in the gold price. Central bank purchases are one of the main reasons why gold price forecasts were revised in 2022.

Jewellery demand

According to the World Gold Council, demand for gold jewellery was high in the third quarter of 2022, with consumption exceeding 523 tonnes. Despite the deteriorating global economic environment, this represents a 10 percent year on year increase. Over the last ten years demand for gold jewellery has ranged between 840 and 2,100 tonnes per year, averaging around 1,500 tonnes.

Gold price development in 2023

Banks and forecasting agencies updated their estimates of the gold price for 2023, pointing to rising demand from central banks and ongoing geopolitical tensions. The precious metal gained 0.44 percent in 2022, which made it one of the best performing assets, just behind the US dollar. While bullish sentiment is growing in the market, some gold analysts warn investors that they will have to be patient in 2023. Although gold is expected to continue to outperform most asset classes in 2023, some major banks and commodity analysts do not expect a strong move higher until the second half of the year.

The price of gold could see some pullback towards 2,000 US dollars per troy ounce and may decline somewhat in the near term. It is likely that gold will eventually find a stable level above 2,000 US dollars.

Despite the ups and downs in 2022, forecasts and outlooks for 2023 remain positive. According to analysts and research agencies gold could rise by 10 percent or more in 2023, and Saxo Bank even forecasts that the gold price could climb to 3,000 US dollars.

Gold price development in 2024

In 2024 the gold price recorded a significant increase, confirming its role as a safe haven during periods of economic uncertainty and geopolitical tension. At the beginning of the year gold traded at 2,062.80 US dollars per troy ounce. During the first quarter it reached a high of 2,233.50 US dollars on 28 March and a low of 1,992.20 US dollars on 14 February.

During the year the gold price continued to rise and in October it reached a new all time high of 2,700 US dollars per ounce. By the end of 2024 gold closed at 2,623 US dollars per ounce, which represents an increase of more than 27 percent compared to the beginning of the year.

This growth was supported by several factors, including central bank purchases, geopolitical tensions and the monetary policy of major central banks. Analysts predict that gold will remain an attractive investment in 2025, with some forecasts mentioning the possibility of reaching 3,000 US dollars per ounce. Source: lynxbroker.cz

In Czech crowns gold recorded a year on year increase of 40 percent, as the price per troy ounce rose from 46,155 CZK at the beginning of 2024 to 64,590 CZK on 2 January 2025.

Overall, gold in 2024 confirmed its position as a key asset for investors seeking stability in turbulent times.