One hundred Euro gold coin from Germany

When the economy turns tough and no one knows for certain what the future holds, then the most prudent thing to do with your money is to invest it in gold. A lot of. Countries are catching on to this, but Germany in particular has spent the most acquiring gold. According to a recent World Gold Council (WGC) report, Germany has increased its gold investments by 22%. Last year alone, Deutschland spent about $8 billion buying gold products. The country has been steadily increasing its gold purchases, but considering that between 1995 and 2007 Germany bought a modest 17 tons, a 100-ton leap is quite radical.

When we talk of countries that consume or buy the most gold, India and China are the leaders. This is primarily because gold plays an important role in the Indian and Chinese cultures. For these countries, gold plays an important role in the economy, Germany is slowly but surely inching its way to becoming one of the countries that are buying lots of gold.

Do the Germans know something that we don’t? The truth is Germany is aware of what financial instability and economic and political turmoil can do to a country. The 1920 hyper-inflation is still something that Germans remember. German investors know how unreliable fiat currencies can be. In the past 100 years, Germany has changed currencies 8 times. It is no surprise that German investors would run to gold to protect their wealth in the face of unsettling political or economic state of affairs. According to the WGC report, 42% of investors in Germany trust gold more than they trust national currencies.

The same WGC report cites findings of a survey conducted on German investors. When asked whether gold can retain its value for a long time, 59% of the respondents said it would. The WGC report offered some interesting insights from its survey of German investors. 48% of the respondents stated that gold made the feel financially secure. When asked the reason they invested in gold 57% stated that they bought gold bars and coins to protect their wealth. 27% of the respondents expected gold to bring high returns over a long period of time. In 2016 the amount of gold bought by Germany was even greater than either India or China. This increase in demand can have serious ramifications. The current amount of gold mined every year across the globe is 3,000 tons a year, having one country suddenly want more will put a strain on the industry.

Most German investors who buy gold buy it for its collectable status. Australian Kangaroos are popular with German collectors. These are created by the Perth Mint and are popular for their exotic feel. In December the Mint saw a surge in sales of gold. The mint reported a 13% rise at the end of 2017. The sale of precious metal like gold was brisk at the World Money Fair that was held in Berlin. There were more buyers buying gold at the Perth Mint booth.

Meanwhile, in North America, sales of gold have been tepid. Traditional gold investors in North America have jilted gold and got caught in the stock market bubble. President Trump managed to convince a lot of investors with promises of tax cuts, economic and employment growth. People who buy gold in America believe that they no longer need to be worried, so they are buying stocks instead of gold. However, what happens when Trump’s tenure becomes a complete catastrophe?

Source:

1. https://www.gold.org/goldhub/research/gold-investor/gold-investor-december-2017/a-market-transformed
2. https://investingnews.com/daily/resource-investing/precious-metals-investing/gold-investing/germany-gold-powerhouse/