Gold is not only a symbol of wealth but also an important investment asset. In today's environment of geopolitical crises and a loss of confidence in fiat currencies, institutional investors prefer ‘basic’ assets. Historically, in the period from 1971 to 2025 inclusive, gold prices grew at a rate close to 7.8% per annum. This dynamic can be easily explained by its importance in history and its reputation for preserving value, as it is the material that has always been the object of desire for individuals and countries alike.
Today, we continue to see the same high excitement for the precious metal, as in times of financial, economic or political instability, entire countries reorganise their asset portfolios to increase their gold reserves. In this way, institutional investors increase the stability of their portfolios, and often make a good profit.
Gold is often used as a strategic asset because it has very ‘hard’ advantages, such as:
- Limited and scarce - it cannot be printed like fiat currency or mined like cryptocurrency. Today, about 200,000 tonnes of gold have been mined in the world, which is equivalent to a cube with a side of only 21 metres. Over time, production is beginning to decline, and the costs of finding deposits and the process itself are only increasing;
- Demand - gold has been used by mankind for more than several millennia and still remains relevant. The main industries where gold is used are jewellery, medicine, electronics, high technology, including artificial intelligence, and others.
- High liquidity is an asset that everyone wants: from central banks and countries to small private jewellery workshops or retail investors.
The main function of gold is obviously to hedge and protect an investor's portfolio. According to a study by the World Gold Council, the most profitable period for the precious metal is stagflation in the economies of developed countries. And this is exactly the situation that is currently taking place in the US, although the weak GDP dynamics and unemployment are only moderately low, which is already enough for the asset to grow:
Using the chart, it is easy to see that in the period from 2020 to April 2025, there was a negative correlation between the dollar and gold index. During this time, the price of gold rose by 112.05%, while the DXY showed an increase of only 5.21%. The price dynamics can also be used to understand the investors' excitement for gold in times of uncertainty or negativity in the economic or political arena.
To understand the behaviour of the gold price in times of global crises, we do not need to look back to events that took place 30 years ago or more, as the last 5 years have challenged the economic stability of the global economy. Therefore, let's look at how gold behaved during such events:
Impact of negative events on gold 2020 - 2025.
The table shows that gold shows an increase in value during crisis events and consistently performs its function of protecting investors' portfolios. It is often this asset that is counter-trend to most global markets and is able to keep investors afloat in the most turbulent situations.
However, even the precious metal has its drawbacks. Since gold is a very highly capitalised instrument, its price dynamics remains moderate compared to other assets. It is not uncommon for investors to use the ‘profit’ from buying and selling gold to offset the impact of inflation on their portfolio. Since income is often expected for more than 3-5 years, such an investment should be considered only as a long-term investment.
Now that it is clear what gold is as an asset from an investor's point of view, let's look at the specifics of the Ukrainian market. Today, there are not many banks that conduct transactions with precious metals:
- PrivatBank;
- RVS Bank;
- Industrialbank;
- OTP Bank;
- Commercial Industrial Bank;
- Pivdenny Bank;
- Oschadbank;
These major Ukrainian banks offer gold in the form of stamped or cast bars weighing from 1 gram to 1 kilogram. Of course, precious metals are produced only by accredited refiners licensed by the LBMA. The following manufacturers are mainly represented on the Ukrainian market:
- Argor-Heraeus;
- Valcambi;
- PAMP Suisse;
- Umicore.
An investor should also understand that when buying physical bank gold, there are several important nuances to consider. Firstly, bullion up to 100 grams is considered the most liquid, meaning that it will take longer to sell a kilogram bar, as it will be much harder to find a buyer. Secondly, you should only invest in gold that is stored in packaging from an accredited manufacturer, and you should also be very careful to monitor the integrity of the blister, as modern bars already have a quality certificate and a unique code from the refining company built into them. As a result, any breach of integrity reduces the value of the gold itself, or even leads to a complete refusal to buy by the counterparty.
Another way to invest in gold is to open a precious metals bank account. Such an account does not involve physical bullion, but only ‘fixes’ the amount of metal in troy ounces on the client's account. This form of account has its significant advantages - no need for logistics, storage and valuation of physical bullion - but it also has a number of significant disadvantages:
- Such accounts are not covered by the guarantee of the Deposit Guarantee Fund, which means that in the event of a bank failure, there is a risk of a complete loss of the asset;
- The gold on such an account is not physically accessible, and the client does not have a direct right to a specific bar, but only to its equivalent;
- The possibility of withdrawing the metal or converting it into cash is often accompanied by commissions and is not always available under currency restrictions.
In other words, in wartime and in a limited banking market, this instrument is particularly vulnerable to the risk of fraud or bank default.
The next factor to consider when investing is, of course, the price. Comparing it on the national and international markets, it is easy to see that the price of gold on the Ukrainian market is somewhat higher. Today, the premium to the market price is about 10%, which is an extremely large overvaluation of the asset.
This high price is due to the NBU's currency restrictions imposed in Resolution No. 18, which led to a significant reduction in gold imports in 2022-2023 and ended with a complete cessation of legal imports in 2024. In other words, banks can only trade in the part of the gold that was imported earlier or in the surplus after buying and selling bullion from their clients. Such an artificial shortage of precious metals and, as described above, the long-term profitability of gold lead to unfavourable conditions for investors in Ukraine.
But this is not all the NBU's ‘spokes in the wheel’, as the same Resolution No. 18 introduced restrictions on the sale of precious metals to legal entities or individual entrepreneurs. Transactions with them are allowed only if these entities need precious metals for their business activities, for example, for jewellery.
As a result, gold continues to hold its position as a universal asset of trust - stable, physically tangible and resistant to crises. Despite regulatory restrictions, the complexity of storage and a certain inertia in value growth, it remains an important component of strategic investments, especially in times of uncertainty.
For CII, gold is formally a permitted asset - it is directly stipulated by the Regulation on the Composition and Structure of CII Assets. However, in practice, it is currently impossible for a legal entity to purchase bank gold due to the current restrictions imposed by the NBU under martial law. Thus, gold remains a potentially attractive, but not affordable instrument for CII in the current conditions.
AUTHOR: ANDRII ROMANYSHEN
