Two main reasons for purchasing gold – inflation and wars – have unfortunately not been lacking this year either, but despite this, Croatian citizens have bought a slightly smaller amount of gold than last year, which was a record year. According to leading domestic dealers in investment gold, the turnover in the first part of this year is about 10 percent lower than last year. However, estimates of the total value of purchased gold bars and coins revolve around 200 million euros.
Josip Kokanović, the operational director of the Gold Center, emphasizes that this year, in terms of achieved turnover, has been slightly worse than last year, but this was to be expected after the huge increase in demand for gold at the beginning of the war in Ukraine.
– If we look at a longer trend, for example, the last five years, there is a significant market growth. Until 2019, investment gold sold in Croatia was at most 10-20 million euros annually, while in 2023, gold bars and coins worth probably more than 200 million euros were purchased – estimates Kokanović.
Sixth Year of Growth
By the way, from the beginning of the year to the beginning of this week, the price of gold expressed in euros has increased by 7.9 percent. On global markets, the price of an ounce of the most precious metal is currently around 2040 dollars, which is the highest level in the last six months.
– If there are no significant changes by the end of the year, this will be the sixth consecutive year that the price of gold rises. The cumulative increase over these six years is approximately 70 percent – emphasizes Kokanović.
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That this year has been generally good for gold traders is also confirmed by Mia Petričević, the CEO of Auro Domus.
– In the first 11 months, across all activities, Auro Domus achieved results that exceed the plan. Compared to last year, the overall result is significantly lower due to the fact that revenue from currency exchange operations has significantly decreased as expected after Croatia joined the Eurozone. As for the gold business alone, the result has remained stable, and we expect it to be at the level of last year, which was a record year, or around 50 million euros at the group level – states Petričević.
At the level of the entire Croatian market, adds the head of Auro Domus, it is likely that sales will be about 10 percent lower than last year, when Croats purchased a record two billion kuna worth of investment gold. The Gold Center achieved its best turnover this year in March, following the outbreak of problems in the global banking industry after the collapse of Silicon Valley Bank, and after it, the Swiss giant Credit Suisse, as well as in October, following the outbreak of war between Israel and Hamas.
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– Unfortunately, as soon as a crisis calms down, many of those who planned to invest in gold forget about the problems and postpone their purchase until the next crisis. But I believe this is the wrong approach. Just as a house is not insured against fire after the fire has already begun to consume the house, purchasing gold at the peak of an economic or political crisis is often a late decision – Kokanović points out.
When asked if they notice any changes in the structure of demand, Auro Domus states that they have noticed certain changes in the structure of clients, in terms of recording an increase in larger individual purchases above 100,000 euros, while there are somewhat fewer purchases of “medium” values from 10,000 to 30,000 euros.
– We believe this is a consequence of high inflation and rising living costs, which have reduced the ‘surplus’ in the household budget for citizens of the upper middle class. A similar situation, but to a significantly greater extent, is occurring in the markets of Western Europe, especially in the most developed ones like Austria and Germany, where there is a long tradition of buying gold among almost all social groups. In Germany, for example, the turnover of certain producers has fallen by up to 70 percent, which is why they are more actively turning to distant markets (China, USA, Middle East), but also to growing markets like Croatia – says Petričević.
Close to Record Values
However, in local investment gold shops, most purchases are made by locals. Josip Kokanović reveals that 90 percent of customers at the Gold Center are Croatian citizens, while the rest are citizens of Bosnia and Herzegovina and Serbia. The share of foreign citizens among Auro Domus customers is also relatively small, ranging between five and ten percent.
– However, given the widespread presence of branches throughout Croatia, especially in tourist-rich cities, we have noticed an increase in purchases by foreign guests this season – notes Mia Petričević.
Regarding expectations for next year, Petričević reminds that the highest price of gold ever recorded in history was in August 2020, when it amounted to 2074.88 dollars per ounce, which shows how close we are to new record values of precious metals.
– In October, the price increase was caused by the geopolitical situation, while the price increase in November – which analysts expect to continue throughout 2024 – is a consequence of economic instabilities and the expected ‘looser’ monetary policy. Given the announced reductions in interest rates, which will also result in ‘release’ of liquidity in a situation where inflation is still above target levels, as well as the fact that the economic recession in the USA and Eurozone has been postponed but not avoided, it is realistic to expect lower demand for “riskier” options like stocks, and higher demand for safer investments “resistant” to inflation like gold. Therefore, we expect an increase in demand for gold globally, but of course also in Croatia – says Petričević.
Already by the spring of next year, financial analysts expect the first reduction in interest rates by the US central bank. If there is indeed a drop in reference interest rates in the USA and Eurozone next year, it would be a fairly reliable sign that the situation in the economy is not good and that a recession is likely coming, assesses Josip Kokanović.
– In such a situation, the price of gold tends to rise, and this increase is often very rapid and percentage-wise large. For example, at the beginning of the major financial crisis, the price of gold rose by 200 percent from 2007 to 2011. I hope the next recession will not be so deep and prolonged, but even in a mild recession, it is very likely that the price of gold will rise by at least several tens of percent – Kokanović believes.
