“It’s been a crazy journey,” says Henrik Marx (37) of the price evolution of gold, silver and other precious metals in recent months. Marx is Head of Precious Metals Trading at Heraeus, the world’s largest precious metals trader headquartered in Hanau, Germany. As a matter of fact, when the Ukrainian war broke out in February, the price of 1 kg of gold skyrocketed to almost 60,000 francs.
When central banks around the world, especially in the USA, started to tighten interest rates in the summer months as part of the fight against rapidly increasing inflation, the gold price fell sharply again. With rising interest rates, it is becoming more attractive to invest in time deposits rather than storing gold bullion in a bank vault.
Investing in gold instead of bitcoin
The wild journey should continue in the new year. While presenting his annual precious metal forecast, Marx predicted, “We are optimistic that the price of gold in euros will rise to an all-time high.” Thanks to a recession scare and a slowdown in inflation, central banks are unlikely to raise interest rates as sharply as they have in the past – which will support the gold price.
Additionally, central banks around the world are buying more bullion than they’ve had in decades. By holding less foreign currency and more gold, they want to protect themselves from inflationary turmoil and reduce their dependence on the US dollar.
Private investors are also heavily interested in gold. Among them, crypto investors who had hoped that Bitcoin would become the new safe haven will likely be disappointed. This year, they experienced their blue miracle with the price turmoil in the crypto market.
Swiss refineries operating at full capacity
The strong gold price is good news for Switzerland: four of the world’s seven largest gold refineries are located here. Together they process 40 to 70 percent of the gold traded worldwide – depending on the estimate. Industry leader Heraeus also operates a massive gold smelter at Mendrisio TI.
“The company has been in full swing for a year or two,” says Marx. The prediction of the precious metals trader will continue in this way in 2023.
And this despite the fact that international sanctions mean that Russian gold can no longer be melted in Swiss refineries. Still, Waldimir Putin (70) continues to do well with gold mining and exporting. According to Heraeus’ estimates, ten percent of the gold mined worldwide still comes from Russia.
Russian gold for China and India
Critics complain that troubled gold is remelted, especially in Dubai, thus receiving the Dubai-origin stamp instead of Russia. “Russia has no need to hide its origins,” argues Marx. China and India continue to buy Russian gold without hesitation. As long as Putin finds enough buyers in the East, he doesn’t have to smuggle gold to the West by detour.
Putin should be pleased that there are growing signs that China’s strict zero-COVID policy is being relaxed. Quarantines, closures and supply chain disruptions have threatened to reduce the Chinese jewelry industry’s demand for gold.