Gold is absolutely stunning right now. Not only has it easily absorbed the effects of the soaring inflation we have experienced over the past few months (see: Gold sets new benchmarks. It beats inflation by a factor of two). Its price has also continued to rise, passing several major milestones in March alone. Since the beginning of 2024, the price of gold has increased by almost 20% in Czech Crowns, 16% in Euros, 14% in Polish Zloty and 18% in Hungarian Forint.

 

Gold price in EUR, source: IBIS InGold

 

What is driving the price of gold?

The economy is currently facing multiple challenges. Market uncertainty, the depreciation of the dollar, fears of a recession, the war in Ukraine, worries about the spread of conflict in the Middle East and concerns over the stability of the banking sector and the real estate market – these are all factors contributing to the growing volatility. In this climate, investors are looking for a place where they can invest and grow their money. Gold, in particular, can absorb shocks and provide its owners with peace of mind.

Their appetite for gold is also fuelled by expectations of interest rate cuts. With some countries already beginning to lower their rates, the actions of the ECB and the Fed are being closely watched. Lower interest rates diminish the appeal of savings accounts, bonds and similar investments, so investors are searching for ways to make their money work for them in other safe assets.

The depreciating dollar and rising demand are also driving up the price of gold. With people’s confidence in the currency waning, they are now looking at gold not only as an investment, but also as a truly universal world currency. Its value has been steadily increasing over the long term, offering both security and peace of mind. In the past couple of years, however, the volume of gold purchased by central banks has also been growing significantly. Central banks’ average quarterly gold purchases have increased from 118 to 291 tonnes, which is a 147% increase. There are strong indications that central bank purchases will continue to be robust.

 

Does it make sense to invest in gold right now?

Absolutely, as long as you are looking for more than a speculative short‑term investment. The price of gold has long been on an upward trajectory, and it wasn’t long ago that we thought a price above USD 2,000 might be overly optimistic. Everything is playing into gold’s hands, with an increasing number of analysts expecting it to keep rising and close 2024 at around USD 2,400‑2,600.

Granted, the price of gold fluctuates, but that shouldn't be a reason to hold off on investing in gold. We may not see such high gold prices again. The best strategy is to invest regularly so that you can take advantage of the price averaging effect and be confident that your portfolio will serve you well.