What affects the price
The global gold market is forced to live by certain rules. Thus, the value of an asset today is mainly influenced by speculative activity, rather than real supply and demand.
They have repeatedly tried to link the dynamics with the volume of production, but this has never been possible, since, unlike oil, there cannot be a big dependence here.
Thus, the only more or less significant factor is the seasonal increase in demand. Outbursts usually occur in summer or spring. It is during these periods that mass weddings take place in Asian countries, and this region generally traditionally leads in gold consumption.
It is much easier to see the pattern of fluctuations in the exchange rate of a precious metal if you compare its quotation with the situation developing at a particular moment in the foreign exchange market. So, the more uncertainty and chaos there is in the latter, the more expensive gold is sold.
The increase in the cost of a gram today, for example, can easily be explained by the depreciation of the dollar. The American currency looks less and less attractive in the eyes of investors, and therefore they prefer to invest in gold.
As a result, in the last year alone the metal has become more expensive by 5 percent. The change in exchange rate led to an increase in prices for jewelry.
Where can you buy or sell
For most citizens, buying gold involves visiting a jewelry store. But it’s unrealistic to buy a ton of it. And what is sold in them is not currency. A gram of the product contains from 375 to 585 (583) or 750 parts of precious metal, 958 in dentures. The currency is pure gold with a purity of at least 999.
This metal is not used for making jewelry: it is too soft. But only pure aurum is used in bars and coins.
On MICEX
Any individual can purchase gold on the Moscow exchange, but there are a number of difficulties.
The minimum lot size is 10 grams. That is, you won’t be able to buy 1 gram, but you can buy a ton! Provided that you can subsequently prove to the tax authorities the legality of the origin of the funds that you spent on such a purchase.
Expert opinion
Lyudmila Pestereva
Our most experienced gold investor
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An individual does not become the real owner of a piece of gold in Russia. An unallocated metal account is opened for him at the National Clearing Center (NCC), and the accounting of the precious metal belonging to a particular investor is maintained by NCO CJSC NSD. Physically purchased gold is stored in the safe of the Central Bank of the Russian Federation. You become only the nominal owner of the precious metal.
In the future, it will be possible to sell the right to own the asset, receiving in return funds in any currency at the current rate.
Coins or bars in a jar
If the shine of a precious metal is too attractive and you long to possess it in kind, the easiest way to realize your dream is to purchase coins or bars (minimum bar - 10 g) in a jar. To do this, just select the size of the bar or coin that suits you and pay the current price according to the quotes.
A piece of metal can be given to you or left in storage in a bank safe deposit box. In return, a certificate is issued, which is also a means of payment. By presenting it, you can make any commodity or currency transaction.
Compulsory medical insurance
An impersonal metal account is a method of virtual ownership of precious metal, similar to trading on the MICEX. That is, by purchasing a certain amount of gold in compulsory medical insurance, you do not become its real owner, but only receive a record of ownership. Based on this record, you can make purchase and sale transactions.
Please note that when selling metal that you own, you are required to independently calculate personal income tax, file a tax return and pay sales tax.
Mutual Fund or ETF
It is impossible to purchase real precious metal either in a mutual fund or ETF. Only the right to own a share of the fund's assets expressed in gold equivalent is acquired.
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Dynamics
The price of a kilogram of precious metal largely depends on the demand for it. The latter is growing continuously. Ordinary people are buying more jewelry, industry needs pure metal, and investors are looking for opportunities to make extra money on the positive dynamics.
The instability of the global economy, inflation in developing countries, and the deficit of their balance of payments - all this increases the demand for gold. The trends are reinforced by the periodic outbreak of armed conflicts.
For example, in the last years of the 70s, a kilogram of metal cost $850. But later prices crawled down, and the trend continued in this form until the end of the century. America is to blame for this. The link to oil ensured the strengthening of its currency and Treasury securities. As a result, it became more profitable to invest in them, and the hype around gold subsided. Because of this, many countries began to gradually get rid of traditional reserves, replacing them with US bonds. For example, now Canada does not have a ton of gold left.
Features of the gold market
The yellow metal plays a completely unique role. On the one hand, it is a raw material resource that is used in the jewelry industry, pharmaceuticals, cosmetology, in the production of electronics, and in high-tech mechanical engineering. The movement of gold prices over the past 10 years generally coincides with changes in the value of other commodity assets. On the other hand, the monetary function of this precious metal is more relevant today than ever. Investors from all over the world purchase it to preserve capital and hedge risks, which are so numerous in the modern world.
Traditionally, the price of gold was set on the London Metal Exchange (LME) during the so-called gold fixing. But since March 20, 2015, the procedure has changed. Currently, electronic exchange auctions are held twice a day (at 10:30 and 15:00 local time). They set the indicative price of the precious metal, which is used for settlements all over the world.
As for gold futures contracts, they are traded almost around the clock on many exchange platforms. At the same time, the daily volume of transactions in the derivatives market often significantly exceeds the total value of transactions with physical metal.
The main players in the gold market include:
- central banks;
- institutional investors: pension funds, insurance companies, investment banks, various investment funds, hedge funds;
- private investors.
The role of central banks, which buy metal for the gold and foreign exchange reserves of their countries, is especially important. The total reserve of physical gold in gold and foreign exchange reserves around the world is estimated at 33,000-36,000 tons.
How much does a kilogram cost now in the Central Bank of the Russian Federation?
According to the exchange rate of the Central Bank of Russia, the cost of 1 kilogram of gold is 3,094,900 rubles.
Accordingly, a gram will cost 3,094.9. For comparison, in 2021 they asked for only 2,200 for the same volume. It is not difficult to calculate how much you could earn from a successfully purchased kilogram. It will come out to almost 800,000 rubles - and this is in just 3 years!
On the world market, assets are sold not in kilograms, but in troy ounces. Now the price of one has reached 1,556.25 in dollars, and in rubles it will be 96,440.81. Accordingly, per gram comes out to 50.03 and 3,100.36.
Gold buying rate
Please note that the purchase rate for gold will always be influenced by the exchange rate of world currencies and, in particular, by the US dollar. There is a certain correlation between gold prices and the value of the dollar. As a rule, it is inversely proportional. In other words, as the dollar rate rises, the cost of an ounce of gold decreases slightly. When it falls, it grows. World gold prices are fixed in US dollars. Accordingly, if in Russia the value of the national currency decreases against the dollar, prices for purchasing gold in rubles will increase.
Banks
Financial institutions make money from the purchase and sale of various assets, and the one discussed in this article is no exception.
How many kilograms of pure gold (999 purity) costs here? It all depends on the current policy and also on whether you want to get rid of the metal or, on the contrary, acquire it.
For example, the price of one gram in Sberbank is 2,926 when buying, 3,229 when selling. Accordingly, a kilogram will cost 2,926,000 and 3,229,000.
When investing in gold, you should take into account that the cost of real metal is always higher, because it also includes the costs of production, transportation, and finally VAT.
How much is 1 ton of gold worth today?
The global measure of all values on Earth - gold - in turn is itself a commodity, the value of which is subject to constant fluctuations. That ton, which was worth a lot yesterday, can significantly decrease in price the next day. It all depends on market conditions and a number of other factors.
The dynamics of fluctuations in the price of the precious metal can be clearly seen by looking at the chart and in the tabular data for the recent period.
Price in billions of rubles:
Price in millions of dollars:
How much could you earn in a year, 2, 5 and 10 years?
Investing in precious metals is one of the most stable instruments. At the same time, the price of gold never stands still. The cost at one moment can increase by 10-15% or, on the contrary, become cheaper. It is best to invest in precious metal for the long term. It’s worth forgetting about your investment portfolio for 5-10 years. In this case, its profitability will be really high.
For example, if you bought a kilogram bar a year ago and sold it today, your income would be 196,000 rubles.
But in two years you would have lost 202,000 (in 2021 the rate was higher).
For 5 years: +1,278,000 rubles (then the price was almost 2 times lower).
For 10: +1,895,000 rubles.
You must understand that there is a big difference between the buying and selling price. This difference is called the spread. It varies between 4-15%.
Don't invest in jewelry. The pawn shop will buy them back only at the price of scrap.
Gold selling rate
For those planning to invest money in gold, keep in mind that this does not need to be done before Thanksgiving in the US, before the Christmas holidays in Europe and America (from December 25). In addition, in September the demand for jewelry usually intensifies, and accordingly, the gold selling rate also increases slightly. Prices may also increase on Chinese New Year's Eve. These are annual exchange rate fluctuations. They depend little on major changes in the economy and politics.
Advice from Sravni.ru: buy and sell gold only on official exchanges or through banks.
Simple substance
In 1869, D.I. Mendeleev formulated the periodic law, which establishes the relationship between atomic weight and the properties of a chemical element. According to the classification proposed by the Russian scientist, gold occupies 79th position. The noble yellow metal is a simple substance because it consists of atoms with the same electrical charge of the nucleus.
In Russian, the word “gold” comes from the Old Slavonic “zlato”, one of the translations of which defines the category “yellow color”. The first letters of the Latin morpheme aurum give the symbol for the periodic table element Au.
Properties of gold
Gold belongs to the group of heavy metals. Its density is 19.32 g/cm³. If a soccer ball with a diameter of 30 cm is cast from pure gold, then such a sports equipment will weigh 272.992 kg. The heaviest metal on the planet is osmium, whose density is 22.61 g/cm³.
Gold begins to melt at a temperature of 1064˚ C. Boiling occurs when it reaches 2856˚ C. Having overcome the melting point, the metal intensively evaporates and the density decreases. The chemical element conducts heat and electric current well.
The plastic material has a hardness on the Mohs scale of about 2.5 units, which is comparable to the strength of a nail. The softness of the substance makes it possible to obtain sheets one micron thick , which are called “gold leaf”. In thin products, a blue-green tint is added to the yellow color of the metal.
Chemists classify Aurum as inert substances that do not interact well with alkalis and acids. Gold dissolves in saturated chlorine water, mercury or a concentrated mixture of hydrochloric and nitric acids taken in a 3:1 ratio. At temperatures above 300˚ C, the precious metal reacts with fluorine. Gold items react with liquid bromine and potassium iodide solution.
Precious metal mining
The main gold reserves are concentrated in granite rocks and deposits with complex minerals, which are called placers. The physical and chemical properties of the Au element are used in extracting the precious metal from rocks.
At the initial stage, the ore is washed. Due to its high density, gold is collected in the enriched fraction of the rock. The process of purifying the substrate takes place in special installations - dredges. In addition to the precious mineral, the resulting concentrate contains associated heavy minerals.
The second stage of cleansing takes advantage of Aurum's ability to interact with mercury and zinc. The moistened concentrate is mixed with these metals. In the first case, an amalgam is obtained, in the second case, cyanides are formed. Then, by distilling the mercury mixture or treating the zinc dust using simple chemical reactions, a pure product is obtained. A prerequisite for the process is the presence of oxygen.
The top five countries producing gold raw materials include:
- People's Republic of China.
- Australia.
- Russian Federation.
- USA.
- Canada.
Areas of use
From time immemorial, money has been minted from yellow metal. For a long time, valuable coins remained a means of payment when carrying out trade transactions. Over time, paper banknotes became the equivalent of “despicable metal”, and ancient coins passed into the collections of numismatists.
Gold is a traditional material for creating jewelry. In combination with silver and copper, alloys of various grades are obtained. The metal is used to make state awards, sports prizes, jewelry, cutlery and dishes.
Gold and foreign exchange reserves are considered an important component of the state financial system. Gold reserves in developed industrial countries reach 20% of the total amount of external assets. The precious metal is a source of liquidity for central banks.
In industry, gilding of surfaces that are exposed to the environment during operation is common. Microcircuits use contacts and printed circuit board elements made of precious metal. Gold plates are used as targets in scientific studies of the atomic nucleus.
In cooking, tinsel is used to wrap expensive sweets. In dentistry, dentures and crowns are made from alloys of gold with other substances. Pharmacists introduce compounds of this metal into medications used in the treatment of tuberculosis. The Au₁₉₈ isotope is used in the irradiation of oncological tumors.
Gold mania
So will we be witnessing gold mania in the future? Yes, in my opinion, very likely.
Central banks are trying to convince the world and themselves that current inflation is temporary, but in fact it portends hyperinflation.
Well, US consumer price inflation just rose to 6.2%, the highest level since 1982!
The Fed must be over the moon! For years they tried to bring the rate to 2%, and now they have reached over 6%. Isn't it fantastic what you can achieve with unlimited money printing and zero interest rates! At 6.2%, prices would double every 11 years, which should really make the Fed happy.
So they did everything they could to destroy the economy and the value of money. I don't know what gives them the right to call inflation temporary. Since they have never accurately predicted anything before, I wonder what tools they are using now to say that it is temporary.
Anyone who understands the effect of unlimited credit expansion knows that it is extremely inflationary. Thus, inflation is not only not temporary, but will also get out of control.
Most investors still don't understand gold. This is why only 0.5% of global financial assets are invested in gold.
The current generation of institutional and retail investors has not experienced inflation pressures since the US last experienced it more than 40 years ago. They all thought that inflation was dead and buried, when in fact, all the actions of governments and central banks have created the most perfect climate for inflation, which is not only rising, but reaching hyperinflationary levels.
With gold now rising across all currencies, a very strong and sustained move to new highs and beyond will follow.
Additionally, in the next couple of years we will likely see a stampede into gold by institutional investors who need to have some inflation protection in their portfolios. But even if they increase their holdings from 0.5% to 1.5% in gold, there will not be enough gold in the world to meet demand. This increase in gold demand can only be met by much higher prices.
Today, 10 tons of gold at $1,900 an ounce would be worth $610 million. Institutional investors will spend the same dollar amount when the price rises to, say, $10,000 dollars. But instead of 10 tons, they will receive just under 2 tons.
What price will gold reach in paper money? It's impossible to say. It all depends on how much money is printed and what the real value of the dollar or euro will be at that time. If the dollar falls to zero, as has happened with every other currency in history, gold will of course reach infinity, measured in worthless paper money.
