Gold as a defensive assett in 2024

By Rhod Mackenzie

Analysts interviewed by RIA Novosti predict that gold and its related financial instruments will maintain their investment relevance and status as a hedge against inflation in 2024.
Investments in gold are considered conservative and can act as a protective asset during periods of economic instability, with the potential for significant price increases. Various instruments are available on the market that are linked to the price of gold, including purchasing bullion or investment coins, buying shares and bonds in gold mining companies, and opening impersonal metal accounts.

PROTECTION AGAINST INFLATION:
Gold is a defensive asset against inflation, according to Boris Krasnozhenov,the head of the analytical research department at Alfa Bank. According to him, gold is a hard currency and investing in it can help fight against inflation. Although fiat currencies tend to depreciate in value over time, the purchasing power of an ounce of gold remains constant.
There are high inflation expectations in the market due to a significant increase in the money supply in recent years. The strongest demand for physical gold has been observed both from central banks and the general population. Central banks worldwide purchased record volumes of gold in 2022-2023, starting from the late 1960s this is the first time since the process of abolishing the gold standard began," Krasnozhenov stated.

Finam Financial Group analyst Alexander Potavin agrees that gold can be used as a protective instrument against inflation, given the increasing amount of fiat money in the world every year. He also predicts that prices for the precious metal will continue to rise this year.

Dmitry Puchkarev, an analyst from BCS World of Investments, assessed the prospects for gold in 2024 as optimistic, noting that the metal may be in increased demand amid easing monetary policy by the US Federal Reserve. Puchkarev shared his opinion that, from an investment perspective, gold is interesting. However, it may also be worth considering purchasing shares in gold mining companies that generate additional income through dividends.

The current gold prices are attractive for investment, and a possible weight of up to 10% in the portfolio seems rational. According to Krasnozhenov, investments in gold can take the form of physical gold or shares in gold mining companies with an attractive growth story, such as Polyus and Yuzhuralzoloto.

Potavin noted that investing in gold bars can be a long-term measure to diversify savings across different asset classes. However, he also identified some key disadvantages of gold bullion, including low liquidity, a significant spread between purchase and sale prices, and additional storage costs.