Communion gifts in times of high inflation

Cash and gold are some of the most popular gifts for First Communion. While cash is currently depreciating about 1 percent. per month, gold shimmers exceptionally strong, keeping the price close to its all-time high.

Cash is king

Cash remains one of the most popular First Communion gifts. However, during high inflation, it quickly loses its value. In April, prices were up 14,7 percent. higher than the year before and 0,7 percent. than in March. It can therefore be assumed that cash loses about 1% this year. its value per month. Therefore, if the recipient puts an envelope containing PLN 1000 in a drawer in May, then when he withdraws the money in a year, it will probably be worth about PLN 880 in real terms.

Inflation remains twice as high as the interest rates on the best bank deposits. The best 12-month bank deposits currently give 7 percent. per year. If you put PLN 1000 into such a deposit, then after a year after paying the tax, you will receive PLN 1057, which will then be worth PLN 930 in real terms. So the loss in value will be about PLN 70.

It turns out, therefore, that by donating cash, we basically encourage its quick spending (which, unfortunately, fuels inflation even more), due to the progressive loss of value. Although it can also be an element of economic education, encouraging to look for ways to preserve the value of money. For example, by making sensible and long-term investments.

Golden times for gold

While cash is having a hard time, now is an exceptionally good time for gold. In April, it approached $2070 an ounce, its all-time high. It is now only slightly lower at $2035 an ounce. This makes both gold bars and gold jewelry, which are common communion gifts, extremely valuable.

Three elements contribute to the high price of gold. The prospect of lower interest rates in the US boosts the value of non-permanent assets (like gold). On the other hand, a weak dollar makes gold cheaper for China and India, which are important players in the gold market. The third element is the search for safe assets in the context of concerns about the state of the US banking system and recession, which is also driving up the price of gold. Demand for gold is fueled by investment purchases, which account for about 55% of the total. global demand. The remaining 45 percent is the demand for gold used to make jewelry and used by industry. This demand is declining as a result of the global economic slowdown.

By the way, it is worth remembering that gold can be invested not only in physical form, but also through various types of financial instruments. Gold-backed EFTs saw a large inflow in March for the first time in 10 months.

Data correct as of May 11.05.2023, 14 at 00:XNUMX CE

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.