Market story: Valentine's Day has never been so expensive? The prices of coffee, chocolate and gold are at an all-time high

Like other holidays, Valentine's Day is a time to give gifts to loved ones. However, if you haven't bought chocolate, a gold pendant or invited someone for coffee in a long time, the prices of these products and services may surprise you a lot. The prices of commodities needed to prepare all these gifts are reaching historical peaks, so it can be clearly stated that this Valentine's Day will be not only more expensive than last year, but also the most expensive in history.

Cocoa even twice as expensive as in 2024

Last year, we could read many times about extremely high cocoa prices, which could translate into higher chocolate prices. Producers such as Hershey, Mondelez, Mars and Ferrero have long used cocoa inventories, reduced the size of chocolate bars or reduced the percentage of cocoa in finished products, so as not to raise prices for as long as possible. However, the availability of cocoa beans on the market is dramatic. Inventories have fallen to their lowest levels in about 30 years, and Côte d'Ivoire and Ghana have only slightly increased production prospects in the current season. Diseases of trees, weather and regulations make cocoa more and more expensive. Prices have not only exceeded the level of $10,000 per tonne, but also exceeded the level of $12,000 per tonne at some point, which means twice the price than for Valentine's Day in 2024. Of course, this does not have to mean twice the price of a chocolate bar compared to levels from last year. The amount of cocoa in products is falling, the price depends on other raw materials such as milk powder or sugar, and additionally service costs. Nevertheless, chocolate is not only much more expensive at the moment, but most likely its prices will rise, as producers no longer have a choice and will have to pass the costs on to consumers. Will we see improvement? Climate change in many aspects is irreversible, but on the other hand, high prices may cause a desire for greater investment among farmers not only in Africa, but also in South America. However, this generates another problem related to deforestation. Upcoming regulations in the European Union will mean that European producers will not be able to buy cocoa beans from areas that were deforested after 2020. Therefore, in a few years, chocolate prices in Europe may rise dramatically, even if there is more and more cocoa on the market.

Coffee has never been so expensive

At the end of 2024, media headlines shouted that coffee could break the highest levels in history, which were last seen about 50 years earlier. Arabica coffee prices have not only broken these levels, but have reached 400 cents per pound. That's 4 times more than in 2020! Those 5 years ago, coffee was so cheap that its production costs often exceeded the market price, which forced farmers to abandon their plantations, mainly in Central America, and switch to the production of corn, soy, or coca, which is popular in this region. This is when the situation arose in which, with growing demand, production prospects were severely limited. Coffee consumption was growing, not only in the main markets, i.e. in Europe or North America, but also in Asia, which is currently the main driver of global demand. Coffee planters who survived the problem of low prices from 5 years ago, however, were not spared by the weather. The La Nina and El Nino weather phenomena significantly affected the weakness of Robusta production in Vietnam at the beginning, and then led to prolonged droughts in Brazil. Although it was initially expected that the 2024/2025 season would lead to a revival and rebound in production, the realities turned out to be completely different. Heavy rains in Vietnam and Indonesia cause diseases and hinder harvests, while the lack of rainfall in Brazil significantly limits harvest prospects and significantly limits the quality of coffee. It is worth emphasizing that Brazil is the largest producer of Arabica in the world, while in the case of Robusta, the leader is Vietnam. Of course, it is not just about weather factors. The former US president at one point threatened to impose tariffs on Colombia at the level of 25%. Colombia is the second-largest producer of Arabica in the world and is often considered a producer of much higher quality, which is why this country is one of the main suppliers of coffee to the USA. It is also worth remembering that high prices will not cause more coffee to be produced suddenly in the short term. New plantings need several years to yield crops. Therefore, if the weather does not improve, and with current climate change the chances seem slim, coffee prices may remain elevated for the next few years, even with alarming statistics regarding the reduction of global coffee consumption growth.

High gold prices do not reduce demand

In addition to small gifts in the form of chocolates or an invitation for coffee, one of the most popular gifts is jewelry. Of course, the most popular and most expensive is gold, and demand for this precious metal has increased significantly in recent months. Last year, around Valentine's Day, gold cost just over $2,000 an ounce. At the moment, prices exceed $2,900 per ounce, which is an absolute record high. Although jewelry demand has been weak in recent quarters, mainly due to a decline in interest in China, in the case of other markets such as India, Europe or the USA, we see constantly growing demand there. What's more, greater demand for gold in the form of coins or bars is reported by investors who are unsure of the future. In addition to investment demand, demand from central banks is also doing great. In 2024, central banks purchased over 1,000 tons of gold, which means that it was almost 1/4 of all global demand for gold. It is worth mentioning that the undisputed leader in gold purchases was the National Bank of Poland, buying about 90 tons of gold. We also have central banks from Turkey, India and China at the forefront. Taking into account investment demand and demand from central banks, it dethrones jewelry demand, which for years was the basis of global demand for gold, often exceeding even 50% of all gold demand. Already at this point, we can see greater interest in Arab countries in gold jewelry, due to rising prices, although, as jewelers indicate, larger investors are holding back from larger purchases, waiting for price stabilization. Will this happen, however? Gold price increases are driven by geopolitical uncertainty, which is also increased by the decisions of the new US president. Only the elimination of all risk factors in various parts of the globe could erase the risk premium on the gold market, which currently amounts to at least 15-20%.

Gold, coffee and cocoa prices increased significantly since the last Valentines day. Source: Bloomberg Finance LP, XTB

The most expensive Valentine's Day in history

Of course, in the case of Valentine's Day, no one will look at prices, although of course we can clearly state that it will probably be the most expensive Valentine's Day in history. Since February 14, 2024, coffee prices on the stock exchange have increased by 130%, cocoa prices have increased by 68%, while gold prices have increased by 46%. It is worth remembering, however, that a big problem in the case of all the commodities considered is the fact that despite high prices, larger amounts do not go directly to farmers or employees involved in extraction. Until this changes, there will be no pretext for production to increase in the future, which would lead to price normalization. Of course, it must be remembered that we do not have to buy our loved ones, for example, a ton of cocoa, a bag of coffee or a gold bar right away, incurring huge costs, but wanting to express our feelings with a sweet or gold gift, this year we will have to reach into our pocket much deeper.