German Investors Flock To Gold

(July 1, 2020 - Steve Ward)

Gold has long been a popular choice of investment for German investors, and it is perhaps unsurprising that in a time where gold demand has risen globally, German citizens are turning to gold to protect their wealth.

A survey of over 2,000 German investors by Goldhub found that, 'When investors in Germany buy gold, they tend to do so with the intention of protecting their wealth, while also keeping one eye on making good long-term returns.'

Goldhub is an initiative of the World Gold Council that brings together data, research and tools for investors in gold. These findings were part of a larger 2019 worldwide survey of over 12,000 investors, entitled 'Retail gold market analysis and insights'.

The survey explains how people think and feel about gold and what motivates them to buy it. The 2019 global survey found that, 'there are clear perceptions of gold as a safe, durable, traditional store of value.' It further found, 'risk management was the key trigger for investments in gold in the 12 months preceding the survey.'

Second only to Switzerland, Germany is believed to have the world's highest per capita number of private gold investors. The motivation behind the huge number of German investors is therefore particularly significant.

The comparative wealth of German investors also allows them to buy more gold. The survey found that 32% of high-income Germans bought gold, but perhaps more tellingly, 19% of low-income German investors had also bought gold.

Most significant however was the finding that of the 2,000 people surveyed, 77% were considering making gold investments. 41% had already made gold purchases in the past, but even those who had not bought gold before were considering doing so in 2019.

Since the report, the outbreak of coronavirus, will have undoubtedly changed the thinking of many investors around the world.

The first confirmed case of the virus in Germany came on January 27th. Measures to combat the spread have been taken on a state by state basis, and Bavaria was the first state to declare a curfew on March 20th.

Since then, restrictions have been eased but recently the North Rhine-Westphalia state has reintroduced lockdown in some districts. While restrictions have seen Germany’s numbers reduced versus those of the UK, Spain and Italy, Germany has still been affected.

Economically the country saw a similar Q1 contraction of 2.2% and is now officially in recession. The country has announced a €130 billion fiscal stimulus package in an effort to help its ailing economy, but as part of the Eurozone is also at risk from financially weaker countries like Italy.

In many ways the pandemic has been an accelerant to existing trends. It has therefore only further increased the already high demand for gold from German investors.

Before German states imposed restrictions, the Irish Times reported on risk averse investors queuing at popular German gold shops to make purchases before they closed. One such investor told the paper, “At times like this you need to diversify'. When asked if the Euro is in danger from coronavirus, he replied “I’m not sure. Gold is always a safe investment.”

Those queuing Germans that did buy gold would have seen the value rise from around €1,300 per ounce in March to a high of €1,633.46 on May 18th and it is holding above €1,500 still.

With fears of a second wave continuing, and many countries in Europe reporting a rise in infection rates, many German investors are once again turning to their favourite safe haven to protect their wealth.