This price increase is a source of mixed feelings. On the one hand, investment into gold may bring lavish profits and even ordinary citizens can make money on it. But on the other, growing gold prices are also a prelude to a crisis in the world economy.
Gold prices started growing at the end of last fall. Last September and October, the U.S. Federal Reserve reduced interest rates in order to alleviate the mortgage crisis, which accelerated the downfall of the U.S. dollar. When the financial market is hit by a storm, investments in gold become a quiet harbor for currency dealers. By the start of November, the price of a troy ounce went up by one third to reach the record high of $850 in the last 27 years. The market took a pause in December and in January prices started soaring again. Practically every day brings a new historic record. But the real record is still far away. In 1980, gold cost $850 per ounce - the inflation-adjusted price would be about $2,500.
However, experts believe that this may happen again because this trend is likely to be long-term. Some predict that it may last for the next 20 years and that this year the price will top $1,000.
Analysts from the Institute of Global and Social Movements do not see many grounds for optimism - growing gold prices against the backdrop of slowing growth of investment into the non-financial sector are a prelude to an economic crisis. But this does not prevent investors from putting their money in gold for a profit.
In Russia, private investors have three legal ways of taming the Yellow Devil - buying a gold bar, gold coins or opening a bullion gold account.
The best way is to open a gold account. As distinct from an ordinary one, it is nominated in grams of gold, which can be bought on the money deposited in it on the day it is opened. In addition to profits from growing gold prices, its owner will also receive interest payments. But the drawback of this deposit is that Russian banks are oriented to the Central Bank's ruble prices. The ruble is growing stronger, and for this reason the growth in gold price rates is less in the ruble equivalent than in the dollar one. Besides, choosing a bank is also risky.
Those who do not place much trust in bankers, but still want to own the precious metal, can buy a gold bar of a certain denomination at a bank and keep it at home or in a bank safe. But this may be a hassle. The bar can only be sold to the bank and its owner will have to pay VAT. If gold prices grow by less than 18% after the bar's purchase, its owner will lose money.
The purchase of gold coins is exempt from VAT. Coins are sold by most Russian banks, but there are also some details here. Banks sell bullion and numismatic coins. The latter have a numismatic premium of about 10%-15%. They are a better investment, but if the economy is struck by a crisis, the owner of numismatic coins will have to sell them for the price of the precious metal they are made of.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
