We often hear about the high price of gold. But it’s only after looking at the relevant charts (here, for instance) that you realise what a truly historic moment we’re living through.
Going back 110 years, the price of gold has never been higher. It’s now around €115-€120 per gram, though it fluctuates slightly. A decade ago it was €30, according to Nicosia jeweller Aris Tsiropoulos of Tsiropoulos Jewelry. For the past two and a half years, the rate of increase has been almost a vertical line.
Even more striking is the chart marked ‘Adjusted for Inflation’, confirming that it’s not just a case of absolute numbers going up over time. A massive spike in January 1980, caused by the 1979 oil crisis, stood for many years as the all-time record price, when adjusted for inflation. In October 2024, however, that record was broken, and since then it’s only shot up further.
“It’s interesting to have a look at the recommendations for large funds, for how much the allocation of physical gold should be in their overall portfolio,” Stefan Nolte, founder and managing director of business consulting firm Shanda Consult, told the Cyprus Mail.
“Such recommendations are typically given by very large investment firms, or very large banks.” About five years ago, he says, the recommended allocation – the proportion of gold in the fund’s portfolio – was five per cent. “Now, the recommendation is 30 per cent.”
It’s no wonder the price is shooting up, when big players like Deutsche Bank and Citibank are urging investment in gold and large funds are (presumably) following that advice. But it’s not just the big boys.
“I have to say that, since a year or so, the number of enquiries we get per week, about whether we are selling silver or gold, has increased like this,” says Nolte, gesturing to indicate exponential growth.
“But it’s all small amounts, that we don’t deal with. So they want to buy 100 grams, or one kilo, or some people even 10 grams.”
It’s a modern-day gold rush – though actually the situation in Cyprus is less frenetic than in other countries.
Tsiropoulos, for instance, finds demand for jewellery driven mostly by non-Cypriots, especially those from economically unstable places. “For example, we get Lebanese coming in,” he says. “Turning their cash into gold” – an obvious precaution in a country racked by hyperinflation.
Cypriots, on the other hand, “don’t have so much faith in precious metals”, tending to invest more in real estate. Their experience with gold largely revolves around birthday gifts and engagement rings. Local jewellers have actually been hurt as much as helped by the gold boom – especially since the prices of most precious stones have also shot up.
Overseas suppliers sometimes go out of stock, says Tsiropoulos, due to high demand in Europe and Asia. He’s also had to put up his own prices – yet average spending has actually decreased among his customers. Many have shifted to nine-carat gold, or even silver. “Wedding rings, for instance, we now make in silver too.”
Soteris Eliades, on the other hand, co-owns Elite Gold Refiners in Nicosia – a very different part of the gold ecosystem, a place where customers sell rather than buy.
His customers are predominantly Cypriots – and the number of people coming in to sell heirlooms and jewellery has predictably surged along with prices.
This raises a whole other question, one of security. How does he know the items coming in aren’t stolen goods?
“You can kind of judge by the person,” he told the Cyprus Mail. “We’ve learned, after 10 years in the business.” Elite was one of many such shops that opened after the haircut in 2013 (most have since closed down), when newly impoverished bank customers dug into Grandma’s old jewellery box looking for stuff to peddle.
They don’t only ‘judge by the person’, of course, also demanding photo ID – but it’s fair to say there hasn’t been a surge of gold-related crime in Cyprus, total robberies having stayed much the same in the past three years.
There’s another, more rarefied part of the gold ecosystem, typified by KDG Gold & Silver Coin Shop in Paphos – a shop that deals in so-called ‘investment gold’, and where for instance you can buy a 100-gram gold bullion bar for around €11,720.
Investment gold is pure precious metal – and also exempt from VAT, unlike jewellery. “Over the past two years, the number of our clients has at least doubled,” CEO Dmitry Kalinichenko told the paper by email.
“Some clients make regular savings by purchasing one small coin every month,” he goes on. “Others make a one-time but significant investment when they buy gold for 20, 30, 40, or even 50 thousand euros in a single visit… Our typical buyer is a man over 40 who sees gold as a tool for long-term preservation of capital.”
Clients come from all over the world, he writes, adding: “We are also pleased by the growth in the number of Cypriot clients, including those under 40. This shows that a significant part of young Cypriots think strategically, seeking not only to spend, but also to preserve and increase capital.”
Kalinichenko appears to be a shrewd analyst in addition to a company CEO: back in 2014 he wrote an article called Grandmaster Putin’s Golden Trap, positing that the Russian president was slowly checkmating the West by selling Russian oil and gas only for physical gold.
Gold, in short, is political, and its record price should be seen in political terms – but Cyprus may be lagging behind in this regard.
Nolte notes that many central banks have “increased the ratio of physical-gold holdings to about one-third” – but our own central bank has gone the other way, slightly decreasing its holdings from 2023 to 2024 (though of course the increase in price still resulted in “an unrealised gain of €286,5 million”, to quote its financial statements).
Cypriots, as already mentioned, still tend to seek security in real estate over gold, probably swayed by its very tangible quality – but, to quote Nolte again, “the thing with real estate is it’s not a liquid investment. You can’t sell it like that (he clicks his fingers) when you want”. There’s a reason why those cautious Lebanese go for jewellery, easily grabbed if you have to flee in a hurry.
Teasing out the effects of this unprecedented demand for gold is one thing, but one should also ask why it’s happening – and of course the answer is obvious. There’s a fear of something coming, the kind of crisis where money may be useless and property too unwieldy.
Nolte is wary about saying too much, unwilling to give fuel to the “super pessimists” and prophets of doom.
Still, he admits, “there is an expectation of some people that the euro will crash soon. And ‘soon’ does not mean in a couple of months, or next year. But the debts loaded on the euro are increasing rapidly”.
“It’s the instability of stock markets worldwide,” agrees Tsiropoulos, proving that it doesn’t take a business consultant to draw this conclusion, “and the wars of the past two-three years… There’s a big demand for the security that most people see in gold.” The fact that central banks are stocking up on it, and the likes of Citibank – not exactly conspiracy theorists – are urging funds to buy more of the stuff isn’t exactly reassuring.
So what happens now? How far can the price of gold soar?
“I believe it’s going to burst, then go down 10-15 per cent and stabilise there,” reckons Eliades. Most people agree a “correction” is likely – but even if it stayed around €100, that would still be three times what it was 10 years ago.
“It’s demand and supply,” shrugs Tsiropoulos.
