According to a report published by the World Gold Council, Europe this year recorded the lowest level of investment in gold purchases since 2008. On the one hand, this is a result of f continued high inflation and, on the other hand, banks raising average interest rates on deposits and savings products, especially at the beginning of this year. In Central and Eastern Europe, the drop in investment gold sales was nearly 40%. Mennica Skarbowa, Poland’s largest dealer of investment gold, also recorded a decline in sales of bullion products comparable to that observed in this part of Europe. However, the Company’s management board is optimistic about the next quarters in terms of generated sales and profitability.
According to an analysis provided by the World Gold Council, a notable increase in sales of gold investment products was recorded only in China, Türkiye, and India. Investment in bars and coins in India reached 55 tons – the highest level in the third quarter since 2015. Demand for bars and coins in Türkiye has already surpassed the previous full-year record set in 2020. It remained at a very high level in Q3 at 30 tons, 40% above the five-year average. In China, quarterly demand for gold bars and coins was at 82 tons, the highest since the first quarter of 2021. Economic and geopolitical uncertainty, as well as disappointing profitability in other assets, drove demand up 16% year-on-year.
Meanwhile, Europe recorded the lowest level of bullion investment products since 2008. This is a result of continued high inflation on the one hand and, on the other, banks raising average interest rates on deposits and savings products and borrowers having to pay higher mortgage installments. Germany recorded the highest decline, down 73% compared to last year. Lower demand for gold is also visible in the Polish market. Mennica Skarbowa is one of two gold bullion trading companies to publish quarterly financial results.
– We recorded a similar decline in sales as others in the European market, after the excellent year of 2022 and 2021. Back then, the situation related to COVID-19 and the start of the war in Ukraine generated a huge increase in sales and, as a result, gold sales records in the Polish market. Now Poles are buying fewer bullion products, because we had high-interest savings products in banks, high installments on mortgages, as well as price increases for many products or services. Aware of the downturn in our market, we devoted this time to strengthening the company. We launched a new online store, started selling gold and silver on various platforms including Empik and Allegro, and invested heavily in marketing campaigns supported by our ambassador, the well-known soccer referee Szymon Marciniak. In my view, despite the losses and the decline in sales also recorded in the third quarter of this year, we have strengthened our condition and our position in the market, which will bring us profits in future reporting periods – comments Jarosław Żołędowski, President of the Management Board of Mennica Skarbowa.
In the third quarter of 2023, Mennica Skarbowa generated revenue of PLN 179.4 million, compared to PLN 280.4 million in the third quarter of 2022 generated last year. The net loss for the three quarters amounted to PLN 4 million, compared to a profit of PLN 5.2 million recorded last year. Meanwhile, it is worth noting that the company has a high level of cash in its accounts thanks to profits recorded in previous years, as well as high inventories of gold and silver investment products, worth some PLN 76.8 million.
Despite the correction in gold demand, the Company’s Management Board is taking all possible measures to improve its financial performance. These include intensive marketing activities launched in the second quarter of this year, identification of new business partnerships with, among others, the banking sector, and upgrading the online store. The Company’s Management Board believes that such activities have had the intended effect in previous years and will have its intended effect in future periods, which is to maintain its position as the leader of the Polish gold market. This is evidenced by the publicly available financial statements of competitors, which show that Mennica Skarbowa S.A. achieved the largest revenue and profit in the industry in Poland in 2022.