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Germany has historically been Europe’s largest buyer of gold coins and bullion. According to the World Gold Council (WGC) (1), German demand for physical precious metals in the first half of the year has reached new highs since at least 2009. Although markets in other western countries have also been keen on buying, the Germans have been particularly active in investing in gold to mitigate inflation risks. According to the sellers, the business is still good.
“Fear of inflation with a long history is inscribed in our DNA. Now the risk of inflation is starting to pick up,” said Raphael Scherer, CEO of the precious metals brokerage Philoro Edelmetalle GmbH.
Philoro gold sales have grown 25% compared to the already intense 2020. “Precious metals have a very positive outlook,” said Scherer. “The sales of gold for Tavex in Sweden, has followed similar trends as customers invest in gold to preserve their purchasing power and use gold as a hedge against inflation.“, adds Juha Miettinen, head of precious metals division, Tavex AB.
The German love for gold dates back to hyperinflation in the Weimar Republic a hundred years ago, which led to a complete collapse in consumer purchasing power. The reopening of the German economy last month helped inflation rise to a record level in the last decade. Adding to the negative interest rates set in Europe also adds to the attractiveness of gold, Scherer said.
In the first half of the year, Germany’s demand for coins and bars increased by 35% compared to the previous six months. According to the WGC, the figure was 20% in the rest of the world.
The root causes of the great gold rush of the Germans are historical. During the last century, the prolonged hyperinflationary period, followed by the two world wars, the tested way to survive hyperinflation and uncertainty in the world, was by preserving assets in gold.
However, the price of gold has fallen by almost 7% since early June as the market prepares for the Federal Reserve to tighten its massive stimulus measures, which helped bring the precious metal to record levels in 2020. Traders kept an eye on the US Federal Reserve’s Jackson Hole economic symposium on August 27 to get an idea of the timing of the stimulus reduction.
On the other side of the Atlantic, the European Central Bank’s expectations of rising interest rates in the coming years are modest. Even if global prices fall, this could support German demand for gold.
Gold has “always played an important role for German investors,” said gold refining company Heraeus Metals Germany GmbH & Co. KG. KG senior trader Alexander Zumpfe. “However, due to the growing interest in buying in recent years, it has become even more prominent.”
Although Germany itself has virtually no gold mining and has modest reserves on a global scale, the financial foundation of the European economic engine is firmly but discreetly based on gold, both at the national and private level. About 75% of the German population owns gold, and 72.8% of the Bundesbank’s strategic state reserves are gold.
Globally, the Germans rank third after India (25,000 tonnes) and China (over 20,000 tonnes) with nearly 9,000 tonnes of privately stored gold. At the same time, given the amount of physical gold per capita, Germany is firmly at the forefront of the world’s leading economies.
The inflation rate was 2.8% in September 2021, as per the SCB (Statistics Sweden) and it is largely attributed to rising electricity prices and higher fuel prices. It is the highest inflation rate since October 2008.
You can protect your purchasing power and protect your assets against inflation, by buying gold at Tavex AB.