Will the investment gold market in Croatia become larger than the stock market?

The significant increase in demand for investment gold in the physical form of gold bars and coins in Croatia in recent years has raised this market to a value of around 280 million euros annually, according to estimates from the Gold Center, one of the leading domestic distributors of investment precious metals. Considering that the investment gold market in Croatia was worth only about 30 million euros just four years ago, it is clear that Croatians are increasingly turning to gold in search of a safe and profitable form of savings and investment.

Gold could surpass stocks

When comparing the size of the Croatian investment gold market with that of the Croatian stock market, a financial instrument that remains number one for many when it comes to investing, we can see that a larger portion of capital in Croatia could soon end up in gold rather than in stocks and funds listed on the Zagreb Stock Exchange (ZSE). While trading on the Zagreb Stock Exchange has remained relatively stable in recent years, fluctuating between 300 and 500 million euros, the investment gold market has grown by more than 750 percent in just five years, and this growth trend is expected to continue in the future.

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Comparison of trading on the Croatian stock market (ZSE) with the investment gold market

photo Gold Center

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– The increase in demand for investment gold in physical form should be viewed in the context of rising uncertainties in the global economy – from the pandemic and high inflation to geopolitical tensions and wars. Gold is considered a traditional safeguard for asset value against such negative phenomena, and it is no surprise that more and more people are buying it to protect the value of their money, but also in hopes of achieving returns that cannot be realized through traditional bank savings, claims Josip Kokanović, the operational director of the Gold Center.

High returns are the main motivation

Indeed, the high historical return is one of the main reasons why investors and savers choose gold coins and bars. The price of gold in euros has, on average, increased by more than 8.5 percent annually over the past twenty years, which is higher than many other forms of investment and savings, as well as the average inflation rate during the same period.

– The high growth of gold prices in the long term is particularly attractive during periods of inflation, but also recession when many other forms of investment, such as stocks or real estate, tend to decline. Gold, on the other hand, often behaves counter-cyclically, meaning its price tends to rise the most when the economic situation is poor, as a larger number of both small and large investors buy it for asset protection. Given that many expect a new recession in the near future, which has already appeared in Germany, it is not unrealistic to expect price increases in the coming years, explains Kokanović.

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Josip Kokanović, operational director of the Gold Center

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It is not a short-term trend

The beginning of the growth of the investment gold market in Croatia dates back to 2013 when, after entering the EU, VAT on gold bars and coins was abolished, making this form of investment one of the few completely exempt from all taxes – both upon sale and purchase. However, the real development of the market only followed from 2018 onwards with the arrival of new competitors who lowered prices to the European average, making it possible to invest in the yellow precious metal affordably and safely.

– Despite the significant growth of the market, it is important to note that we are still far from the average of more developed countries like Germany, Italy, and the USA, where a significantly larger portion of the population invests in gold and keeps at least part of their savings in the form of gold bars and coins. Therefore, we believe that the increase in demand is not just a short-term trend caused by the pandemic, inflation, and war, but that we are only at the beginning of a period in which investment gold will become an inseparable part of the assets of a large part of the Croatian population, adds Kokanović.