The cost of a kilogram of gold and factors influencing it

What does the gold rate depend on?

Exchange rate quotes for precious metals are set by the largest stock exchanges in two forms:

• per troy ounce (31.1034768 grams);
• per kilogram (1000 grams, or 32.1507466 ounces).

For example, you happened to see a kilogram of gold. How much this treasure costs can be easily found out from the daily information on the website of the Central Bank of the Russian Federation.

Several factors influence price formation:

1. US dollar exchange rate.
2. Decrease in metal production due to the influence of natural factors.
3. Stability of the precious metals market.

Several factors influence the gold price

The Double Gold Market Phenomenon

Before 1973, there were two gold markets. In the official segment, Central Banks traded precious metals at reduced prices, thereby supporting the American dollar. In the private segment, the price was formed based on real supply and demand. After America abolished the gold backing of the dollar, the official market simply collapsed. In the fall of 1973, the central banks of leading countries stopped operations with gold at reduced prices. The artificial price parities of the official gold market were completely abolished by 1978.

The graph shows the upward trend in the value of gold in the first decade of the 21st century.

The market price of gold bullion can be influenced by economic conditions, politics and speculation. The rise in value is driven by increased household, industrial and investment demand. If the economy is in a fever, inflation and payment imbalances are growing, along with fluctuations in exchange rates and lending rates, then the cost of gold always increases.

At the end of the 70s of the last century, the West was literally gripped by a “gold rush”. The price of 1 kilogram of gold went through the roof. Then, until the end of the century, negative dynamics were observed, interspersed with minor changes.

The main reason for what is happening is the strengthening of the position of the US dollar and US government bonds against the backdrop of curbing inflation. As a result, interest in the yellow metal has diminished in many countries.

To compensate for budget deficits and reduce public debts, many countries at the end of the last century began to sell off their gold reserves.

When considering global market processes, it is also worth taking into account the multifaceted nature of gold itself, which can be a promising asset, a foreign exchange reserve, and a necessary raw material.

Gold cost

The cost of 1 kg of pure gold today is determined by multiplying the discount price of the Central Bank by the hallmark coefficient (thousandth of the fineness) and the number of grams that make up the bullion. So, for a kilogram of jewelry gold, depending on the sample size, on the Russian market they give:

1. 375 sample - 840,000-890,000 rubles.
2. 585 sample – 1,300,000-1,420,000 rub.
3. 750 sample – 1,680,000-1,800,000 rub.
4. 999 sample – 2,150,000-2,390,000 rub.

The cost of one gram is indicated by the Central Bank in the equivalent of a troy ounce. In November 2021, the price for it on the London Spot Exchange is $1,234. Accordingly, one kilogram costs 32.1507466 x 1234 x 65.46 = 2,597,061 rubles. The price depends on what types of gold the institution prefers to operate - scrap, coins, bars or compulsory medical insurance. Scrap gold is about 30-40% cheaper than bars and coins.

The price of a troy ounce for 2021 fell from $1,350 (February) to $1,234 (October). In the long term, it is necessary to take into account changes in the global political arena and the possible erosion of the authority of the dollar as the main unit of account. But for 1-2 years, before calculating how much a kilogram of gold costs in rubles, you need to know its exchange price in US dollars.

Ingot standards for the whole world

A well-known example of precious metal bullion is the London Good Delivery, which means “safe bet” in English. It has been approved by the LBMA (London Bullion Markets Association) and LPPM (London Palladium and Platinum Market).

Photo: Pixabay/flaart

In the vaults of the central banks of most countries there are classic Good Delivery bars. Their traditional weight is 400 troy ounces, or 12.4 kg. And they are traded in all the main international centers for the sale of this precious metal: London, New York, Zurich, Hong Kong, Sydney and Tokyo.

Table 1. Requirements for 995 gold bars

Source: inzoloto

Acceptable beam bevels: 7-15% in length, 15-30% in width.

The following is imprinted on the outer surface:

• manufacturer's mark;
• weight;
• purity (sample);
• serial number;
• year of creation.

What kind of gold can you buy?

Gold can be purchased in several ways:

1. Ingots. This type of investment is suitable for those who have sufficiently large financial reserves, and diversification will not have a big impact on the current state of the bank account. For long-term storage, you can buy from the bank, for example, 10 kg of gold. This will mean that 25 million rubles are successfully invested and reliably stored for several years.
2. Coins. Investment or commemorative gold coins of the Central Bank of the Russian Federation are a popular way to invest small amounts. The period of storage (ownership of coins) is determined by the buyer himself and depends only on external circumstances - exchange rates, gold prices, and other non-economic factors.
3. Compulsory medical insurance. For those who do not want to store coins at home, opening an impersonal metal account at a bank is suitable. It is convenient, safe and profitable, since you can close it after learning about a fall in gold prices on the spot exchange.
4. Jewelry. A specific type of investment that provides profit only upon subsequent sale through a pawnshop or on the secondary market. As a product, “jewelry” is used only in large quantities.

When purchasing an ingot, be sure to weigh it

Ingots

It must be said right away that the sale of gold bars is the prerogative of only a few of the largest banking institutions in the Russian Federation. Over 60% of this market was accumulated by Sberbank. He sells bars weighing from 1 to 1000 g. But this does not mean that you cannot buy 5 kg of gold. You need to be very careful when calculating future benefits, not forgetting about value added tax.

Ingots require special, very strict storage rules. As a rule, banks provide services for storing them in safe deposit boxes. If a reverse operation (sale of a bullion) is carried out to receive cash or non-cash funds, the bank may refuse to accept it due to discrepancies in various parameters. First of all, in appearance. If the bank refuses to buy the bullion, it can be sold on the secondary market, but at the price of scrap. The negative spread (the difference between the purchase and sale prices) for the owner of the bullion increases, and the benefit from the transaction becomes extremely doubtful.

Investment coins

The “coin” business is simpler than other transactions with a bank for the purchase of gold. Everything is done openly and quickly. It is necessary to take care of the proper storage of purchased valuables:

• in a safe deposit box;
• at home.

Investment coins can always be easily sold to a banking institution. The only conditions that the financial institution sets in this case are the proper appearance of the coin and the presence of a certificate issued by the bank upon sale. Without it, the coin immediately becomes scrap and is purchased by the bank in exceptional cases at a price half the selling price.

Commemorative coins, in addition to the actual price of gold, have antique value, since their issue is always timed to coincide with some events in the life of the state. They appear on the secondary market less frequently. However, if the storage rules are followed, they can be sold profitably after many years, since the upward trend in gold prices will not change in the long term.

Compulsory medical insurance

An unallocated metal account is a profitable option for storing gold in a bank without physically purchasing it. The profitability of such a transaction depends entirely on the dynamics of prices in the market. In addition to gold, OMS is opened in three more precious metals:

• silver;
• platinum;
• palladium.

Investment coins

The bank, as a rule, does not charge a fee for servicing compulsory medical insurance. However, when closing an account, you should remember that the bank issues money at the metal acquisition rate. He includes his own profit from this type of service in a spread of 3-4%. The client can deposit and receive the amount due either in gold or in cash equivalent. Transactions using compulsory medical insurance are not subject to value added tax.

The only serious drawback of impersonal accounts is that they are not subject to deposit insurance legislation.

Jewelry

A very limited field for making a profit from the sale of gold. In Russia, 585 gold is used to make jewelry, which has a fairly large amount of impurities. Storing and using jewelry negatively affects its appearance. Jewelry can only be sold on the secondary market, at a significant discount from the price at which it was originally purchased.

The most realistic way to invest is to purchase jewelry made to exclusive orders. Their cost is significantly higher than others, and their value is confirmed by special certificates and expert opinions. This type of investment is acceptable during the period.

Interesting Facts

The significant value of the described product was noticed by representatives of ancient civilizations. For example, Egyptian scripts contained information according to which, in the process of trade settlements, 1 g of the yellow metal was compared with 2.5 g of silver. This factor is quite understandable, because during the growth of cities, an economy was created and strengthened, which subsequently contributed to the formation of separate states.

Gold as a universal method of payment became established during the development of foreign economic and commodity-money relations. As a standard, it was measured in grams, for which regular weighing procedures were carried out. In order to facilitate the calculation procedure, back in the 6th century BC. e. The first blanks made from a mixture of silver and gold appeared.

Where is the best place to buy gold?

To make full use of the investment properties of precious metals, you should understand how to most profitably purchase them. The best way to invest money in gold is to purchase gold bars and coins. They can be purchased profitably at any major banking institution in Russia.

There is one nuance that has made the purchase of coins a more popular type of investment. When purchasing bars, they include the price per kg of gold and VAT, which is charged at 18% according to the Tax Code. Investment coins are slightly more expensive than bullion (by 4-6%), but they are free of price increases, just like an impersonal metal account. In addition, gold can be purchased from refineries and jewelry trading houses.

Convenient investment

The cost of 1 gram of investment gold with a three-nine purity is set every day by the Russian Central Bank. It is published in official sources. But this is not the price that is used when purchasing precious metals. Based on it, calculations in the financial sector only take place.

The price of precious metal in bullion will always be higher than the exchange price due to the costs of production, sale and payment of VAT of 20%. Thus, taking these factors into account, the cost of the bar will depend on its weight and the content of chemically pure gold in it. So, if the sample of a precious metal is “three nines,” this means that 1 kilogram of the alloy will contain 999 grams of yellow metal.

If you want to save money, open a metal bank account. In this case, there is no need to pay VAT, spend money on renting a cell, etc. Again, such a deposit is easy to cash out at any time.