Investing in gold and coins is one of the traditional methods of investment that has been common since the past until today. High liquidity is one of the features that make this type of investment attractive. On the other hand, this investment method has disadvantages that should be considered by investors. Among its disadvantages, we can mention the extreme fluctuations of this market under the influence of various domestic and global factors. For example, during the last few years, with the start of Corona, the price of gold has grown significantly, while recently, due to the increase in interest rates by the Federal Reserve, the global price of gold has faced a large decrease. In this article, we try to present the advantages and disadvantages of investing in gold, the analyzes made in relation to the price of gold and the factors affecting its price in order to determine when investing in this market will be profitable. Although, in addition to global analysis, we must also pay attention to domestic ones.

There are different ways to invest in gold, and below we mention three of these methods:

1. Physical buying and selling of gold

One of the common methods of investing in gold is to buy physical gold. In this method, you visit the gold shop, buy gold directly and store it. This method has a very high liquidity. Among the disadvantages of this method, we can mention the cost of wages, fluctuations in the price of gold, and the risk of storing and moving gold (lost or stolen).

2. Purchase of gold deposit certificate

Gold is one of the goods that is traded in the commodity exchange in the form of a certificate of deposit. Buying a gold deposit certificate means owning capital and assets; That means you can sell your certificate of deposit whenever you need your capital. In this way, you will be safe from the risks of losing gold or buying fake gold and coins.

3. Buying investment fund units in gold

One of the ways to invest in gold is to buy units of gold investment funds. As you know, to enter any market, acquiring sufficient knowledge and skills is essential. People who do not have full knowledge of the gold market and the factors affecting its price; By buying units of investment funds and entrusting their capital to experts, they can reduce the risk of their transactions and get the most returns from the gold market. The difference between this method and the above methods is its lower liquidity; That is, after registration of the sales order, it takes two days for the money to be deposited into your account, but on the other hand, it has advantages, due to which the liquidity risk can be ignored. Among these advantages, we can mention the possibility of investing with little money, lower fees than buying gold physically, and the Central Bank’s guarantee from the gold fund.

Prediction of the global price of gold in 2023

Every year, the London bullion market conducts a poll conducted by a large number of investment professionals from reputable companies; It measures the price direction of precious metals including gold. According to the latest report published by this organization, in 2022, the price of precious metals will not only not increase, but will also decrease in price. Based on this poll, 34 of the present experts have predicted the average price of gold for 2022 to be around $1,802, which is an increase of only 0.2 compared to the average of 2021. They have also estimated the maximum and minimum price of gold this year at 2,280 and 1,500 dollars. In the following, we try to propose scenarios for investing in gold and coins for Iranian investors by examining the reports presented for the global price of precious metals.

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The most important factors affecting the global price of gold

According to the latest report of the London bullion market, in 2022, three important factors will affect the price of gold, which are:

The first is the monetary policy set by the Federal Reserve. For example, setting a contractionary policy by this institution will reduce the price of gold. About 36% of experts believe that the increase in interest rates by the Federal Reserve in 2023 will have a negative effect on the price of gold. According to some industry experts, under normal conditions, gold and interest rates have an inverse relationship. By increasing performance, a country’s economy will become strong. Inflation will follow a strong economy. In such a situation, gold can be used as a shield against inflation; But when interest rates rise, investors are more inclined to invest in fixed income investments, which are less risky than investing in gold.

The second is the inflation factor. Economists believe that the value of a country’s currency decreases due to inflation. On the other hand, if inflation is formed in a controlled manner, it can be a sign of a country’s strong economy. In inflationary conditions, investors prefer to buy gold instead of holding cash because gold is more stable. In such cases, following the increase in demand for buying gold, its price increases. Therefore, it can be said that the price of gold has a direct relationship with inflation.

The third case refers to the performance of the capital market. If the capital market is in a good condition and provides favorable returns for investors, it will attract many investors, which will cause some gold market investors to leave the capital market. Therefore, a decrease in demand leads to a decrease in the price of gold. The reverse of this article is also true; That is, with the increase in the global price of gold, many investors are attracted to this market and transfer their capital to the gold market. However, these two markets cannot be considered competitors; Because the capital market is an independent market and the price of gold has nothing to do with this market. The price of gold is affected by the exchange rate of the dollar and the world currency. In fact, the withdrawal of shareholders from the capital market and the transfer of money to the gold market does not mean that the capital market is not attractive. Also, the decrease in demand for buying gold and coins is not the only reason for the growth of the capital market. Note that unlike stocks and bonds, gold is not an income generating asset and since it is a physical asset, it requires maintenance costs. However, in the conditions when the capital market falls, gold can perform better.

The impact of the global economic recession on the price of gold

So far, we talked about the gold price forecast by the world’s top capital experts, but the price of gold is influenced by other factors as well. In the current situation, there is a possibility that the world will enter an economic recession. This issue can affect the price of various assets in the world. The question that arises for many investors in such a situation is that buying coins and gold in this situation is the right thing to do? At first, it was believed that the global recession would lead to an increase in the demand for buying gold and many investors would be attracted to the gold market; But the monetary policy of the Federal Reserve and the significant increase in interest rates prevented this from happening. With this monetary policy, the demand for investment in different markets decreased. Most of the foreign investors were inclined to buy American bonds and Treasurys, whose interest rates have increased and are less risky than other markets.

The price of gold and coins in Iran

In recent days, Iran’s financial markets, including the coin and gold market, have been increasing under the influence of the signals of the Vienna talks and the dollar rate; So that during the last week, the coin experienced a sharp increase in price. Financial market experts believe that it is not possible to predict the price of gold due to the extreme fluctuations of the dollar and the dependence of the gold price on the dollar rate. They also stated that although the global price of gold will not grow significantly, the price of coins and gold affected by the exchange rate will continue to increase in the coming days.

Should we buy gold and coins or not?

According to the mentioned information, the price of gold is affected by two factors, the world price of gold and the dollar rate. According to the predictions made, until the end of 2023, the global price of meat will not grow much, although this condition is not permanent and may change under the influence of political and economic events in the world. The gold price forecast is based on the dollar yield and may differ based on the rial yield. In such a situation, the exchange rate between the dollar and the rial can be very effective in determining the price of gold. The exchange rate of the dollar and the rial is tied to factors such as the revival of the JCPOA and inflation.

If the JCPOA is revived, the blocked money may return to the country and the export capacity and the amount of foreign exchange will increase; Therefore, the exchange rate of the dollar and rial will not change positively, it may even fall. In such a situation, gold will not be a good investment option.

However, in case of failure of JCPOA, continuation of inappropriate macroeconomic policies and growth of inflation, the price of dollar will increase in the free market. As the price of the dollar increases, the price of precious metals, including gold, increases; Therefore, in such a situation, gold can be a good option for investment.

Conclusion

Investing in gold has always been one of the high-return investment methods that has attracted many investors. Of course, in order to achieve optimal efficiency in this method, you must have a long-term view. Considering the influence of the gold price on the world price of annas and the dollar rate, the best time to buy gold is when these two factors are growing. Entering this market, like other financial markets, requires sufficient knowledge and information. If you don’t have enough knowledge to enter this market or your capital is low to buy physical gold, you can get the most returns from this market with your small investment by buying units of gold investment funds.