Analysis: Romanians are buying more and more gold to secure investments and obtain higher returns

The amount of gold purchased by Romanians increased in the first quarter of this year by approximately 65% compared to Q1 2024, with the price of gold fluctuating by over 6% in less than a week in April, according to a specialized analysis."With the assumption of the presidency of the United States of America, Donald Trump has become one of the most important voices in the economic field. His economic strategy revolves around imposing tariffs on imports into the US, funds with which to cover, at least partially, the budget deficit of almost two trillion dollars of the largest economy in the world. The declarations of the new American president have led to serious fluctuations in the price of assets, including gold. In April of this year alone, the price of gold varied between a historical record of 3,163 dollars per troy ounce and 2,960 dollars per troy ounce. Basically, a fluctuation of over 6% in less than a week," the analysis carried out by Tavex Romania shows.According to a survey by the World Gold Council, conducted in June 2024, the most cited reason why the central banks surveyed hold gold is the lack of risk of losing the investment, say the company's specialists."Physical gold - in the form of bars or coins - does not present a counterparty risk, unlike assets such as bonds or shares. Once the transaction has been concluded, the gold becomes the property of the buyer. Other reasons include gold's performance in times of crisis and protection against inflation," says Tavex Romania Treasury Department Manager, Victor Dima, quoted in the press release.Discussing the reasons why the NBR does not expand its gold reserves, unlike Poland, the Czech Republic and even Hungary, the latter surpassing Romania in terms of gold reserves in September 2024, the central bank's response to Daniel Voloscsuk, economist at Tavex Romania, was that the bank's strategy is to ensure liquidity in the financial markets - mainly foreign exchange markets, the analysis notes. Thus, the NBR managed to artificially maintain the EUR/RON exchange rate around 4.97. Since July 2024, the price of gold has increased by over 27%. Meanwhile, the National Bank of Poland has purchased 103 tons of gold, increasing its share of gold reserves in total international reserves to almost 21%. Romania currently holds 103.6 tons of gold, representing 9.5% of the reserves held by the BNR.Regarding the amount of gold purchased by Romanians, it increased in the first quarter of this year by approximately 65% ??compared to Q1 2024. The reasons are multiple."We are talking about a development of the investment gold market in Romania. More investors are deciding to include gold in their investment portfolio. But, of course, an important driver was also the unusual increase in the price of gold in the last year. On the other hand, there is a decrease in the amount of investment gold that Romanians sell, which is a good sign. Thus, Romanians are starting to understand that although the price of gold has increased significantly in the last year, the future can bring even higher returns," added Victor Dima.However, the Romanians who sell gold during this period are those who own jewelry. The amount of gold in the form of jewelry sold by Romanians to Tavex Romania increased by almost 170% in Q1 2025 compared to the first three months of 2024. The main reason is related to the increase in the price of the yellow metal.The analysis refers to 1944, when 44 Western countries agreed to establish a fixed exchange rate regime (the Bretton Woods Agreement). Each country was to set a fixed exchange rate against the US dollar - with the possibility of fluctuation of only 1% around the set rate. In exchange, the US dollar was fixed to gold at a rate of 35 dollars per ounce of gold (31.1 grams).The system established, beyond these courses, the infrastructure of the global financial system by creating two institutions: the International Monetary Fund and the International Bank for Reconstruction and Development (or the World Bank, later renamed). The entire system functioned as long as the US financed the reconstruction of international industry in a world fresh from the most fierce war in history.Problems began to arise when the countries that signed the Bretton Woods agreement converted more and more dollars into gold.The halving of US gold reserves between the conclusion of the Bretton Woods agreement in 1944 and the end of the 1960s destabilized the entire system. Thus, on August 15, 1971, US President Richard Nixon ended the convertibility of the US dollar into gold.In a paper published in November 2024, Stephen Miran, current economic policy advisor to Donald Trump, explains that the US dollar is currently overvalued against other currencies. For this reason, the US is not competitive enough to export goods to other countries."According to Miran, under the current system, the United States exports dollars and government bonds, essential for global financial markets, and receives consumer goods in return. He raises two problems with this modus operandi. First, Miran believes that the current system only benefits the rich, those who are present on the stock exchanges. The second problem is that, given that a significant part of the US manufacturing industry has been moved to China, Mexico or other countries where labor is up to 20 times cheaper, the American economy is not keeping up with the growth of the global economy. The same Miran presents three solutions to this problem. The first of the solutions concerns tariffs. According to Miran, tariffs could be used as leverage by the US to negotiate with countries that hold significant parts of the US debt to accept a devaluation of the dollar, "such as the one in the Plaza Accord of 1985. Thus, American exports could become more accessible, at the same time as the real value of American debt would decrease," the analysis shows.Among these countries with which the US could negotiate are Japan (holding $1.08 trillion of US debt), the UK ($740 billion), Luxembourg ($410 billion) and Belgium ($378 billion).The second solution is to negotiate the debt by threatening to reduce the US military presence in various strategic partner countries.The third solution is a restructuring of public debt that requires either the countries concerned to accept delayed interest payments, payments that in 2024 exceeded US military spending, reaching $896 billion, or to accept the extension of bond maturities by 50 or even a hundred years.According to Miran, these solutions taken separately, or even together, could reduce the risk of the United States entering a debt spiral in its attempt to maintain the dollar as the international reserve currency, Tavex Romania analysts emphasize.As the largest investment gold trader in Northern Europe and an increasingly important player in the Romanian and South-Eastern European markets, Tavex is a key member of the Tavid Group, established in 1991. Tavex opened its doors in Romania in 2019 and already has three offices in Bucharest and one in Cluj. Tavex offers high-quality physical investment gold and silver products, as well as foreign exchange services. The company specializes in offering investment gold, including gold coins and gold bars, as well as investment silver, while offering attractive exchange conditions for 46 currencies.