When the Going Gets Tough, Germans Buy Gold; And Germans Are Buying Gold

As the Brisbane Times puts it, “When the going gets tough, Germans Buy Aussie Gold.”

And they are doing it now.

Last fall we reported on Germany’s budding love affair with gold. It appears this is more than just a one-night fling. 

In 2016, Germans poured €6.8 billion ($8 billion) into gold investment products, with 22% of German investors buying gold. Over the last 10 years, Germany has established itself as a 100 ton-plus per year market for gold bars and coins. The World Gold Council calls the growth in the German gold market a “radical transformation.”

The trend continued in 2017.

Germans buy a lot of their gold from Australia. According to the Brisbane Times, gold exports from Australia rose sharply last year with Germany serving as a big driver. Germans spent $8 billion on gold investment products.

Partly it was collectability – kangaroos on coins has a certain exotic feel for German collectors – and partly it was refuge from Germany’s negative interest rates and quantitative easing. But a big factor was nervous Germans moving to protect their wealth, in a way that’s been around for centuries.”

The Perth Mint reported surging sales in both gold and silver in December. According to data released by the mint, the sale of gold coins and gold bars rose 13% to 27,009 ounces in the final month of 2017. Silver fared even better, with sales surging 61% to 874,437 ounces, up from 544,436 ounces in November.

Precious metals sales were also brisk at the World Money Fair in Berlin last week, just a few daus before stock markets began to tank. The Perth Mint reported strong sales at its booth.

Meanwhile, gold and silver sales in North America have been tepid. Do the Germans know something we don’t?

German investors began piling into gold in the wake of the 2008 financial crisis. That led to extremely loose monetary policy. Germany has been in a negative interest rate environment for several years, and the Bundesbank has done billions in quantitative easing. Two and five-year government bonds have traded at negative yields since 2015. Analysists as the World Gold Council said this shouldn’t surprise us in the least.

German investors have an acute awareness of the wealth-eroding effects of financial instability. Hyper-inflation in the 1920s lingers on in the collective memory but, perhaps more importantly, German investors have seen fiat currencies come and go: in the past 100 years, Germany has had eight different currencies. It should come as no surprise that, when faced with such an unsettling economic backdrop, German investors turned to gold – which during our field research one investor described as an enduring currency – to protect their wealth.”

According to the WGC report, 42% of German investors agreed that they trust gold more than national currencies. As one German investor put it, “Gold is still, compared to other investments, the safest investment opportunity because it is economically independent, as it’s accepted worldwide.”

Meanwhile, your traditional gold investor in North America has jilted the yellow metal and run headlong into the stock market bubble. Caught up in irrational exuberance over President Trump’s promise of economic growth and tax cuts, many Americans abandoned gold and guns last year. Peter Schiff has been saying this is a mistake.

The people who typically buy gold in America voted for Trump, and they’re no longer worried about the economy. So they’re not buying gold. They’re buying stocks instead, and I think they’re making a big mistake. They should be selling their stocks and buying even more gold.”

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