After Russia launched a military offensive in Ukraine, Florinus, the company with the largest range of precious metals in the Baltics, said the company's gold sales in Lithuania had increased sixfold on the first day of the war.
According to the head of the company, people fear not only the state of war, but also rising inflation, so there is a massive rush to save their funds. Economist Sigismund Mauricas also says higher demand for investment in gold is due to high uncertainty and rising inflation.
"On the first day of the war, even before the store opened, people flocked and bought golden masse. It has been a record day in the entire history of our company. We sold about 700 thousand. euros per day in gold alone. The number of visitors to the websites has also increased, ”said Žilvinas Leškevičius, the head of Florinus, at BNS.
According to him, the company sold the full range during the day, which is expected to be replenished in a week.
"We are receiving calls and inquiries, but we no longer have anything to sell. The demand is, the turbulent things will not end tomorrow or the day after tomorrow, we will see bigger orders, we will transport bigger cargo to Lithuania. The load is high in Europe, manufacturers do not have time to produce, it takes several weeks for orders to be prepared, ”said Ž. Leškevičius.
"There's a lot of business bailout money in print, rising inflation, it's a huge depreciation of money, which is why people are reinvesting in precious metals that are slowing down the depreciation of money," he said.
Also says higher demand for investment in gold is driven by high uncertainty and rising inflation.
"Gold maintains its purchasing power, whether in times of military conflict or in the face of soaring inflation. History has shown that gold is a safe haven in times of uncertainty. "We currently have both rising inflation and growing geopolitical uncertainty," an economist at Luminor told BNS. "People are diversifying their investments, looking for the safest ways possible," he added.
However, the economist notes that investors need to keep in mind the risks as the value of gold may not only rise but also fall.
"Like any other investment, the volatility of gold is quite high. It is smaller than, say, stocks, but much larger than bonds or other securities. As a result, investing in gold solely because of the security of the return on investment is quite risky, but it has the good feature that the correlation is negative with stock indices, and the value of gold usually rises when stocks fall, ”
According to the economist, if both the geopolitical and inflationary conditions continue, the potential for gold price growth will increase.
"Because the supply of gold is limited. When demand rises, its price automatically increases. But if demand declines, so does the price. And, of course, the possible behavior of central banks needs to be assessed, as Russia has amassed enough and increased its share of the gold reserve. Western countries seem to have reduced that share in recent decades. "If the geopolitical situation in Russia is tense, the central bank may be able to sell some gold and that price could fall slightly if they need to stabilize their financial situation," he said.
Gold in the international market reached the highest price level since September 2020 due to the increase in demand for safe assets due to the Russian invasion of Ukraine, Trading Economics reported. The price of gold futures on the Comex exchange in April increased by 3.3 percent. to $ 1974 per troy ounce. Since the beginning of this year, this precious metal has risen in price by 7.7 percent in the international market.