Inflation protection: Crisis currency: privately owned gold treasure worth billions

Bars, coins, jewelry - the gold treasure of people in Germany has become a little smaller again after the Corona boom.

Inflation protection: Crisis currency: privately owned gold treasure worth billions

Bars, coins, jewelry - the gold treasure of people in Germany has become a little smaller again after the Corona boom. At the beginning of the current year, 9,034 tons of the precious metal were in private ownership in this country, as researchers from the Steinbeis University Berlin determined for the travel bank. The previous survey in 2021 reached a record volume of 9,089 tonnes.

The pandemic had boosted demand for gold as a safe haven during the crisis. Some investors obviously took advantage of the subsequent rise in the price of gold to monetize their holdings. However: "Given the high prices for gold, one could expect that more people would sell gold than buy it. However, the study shows that these numbers are balanced," said the Frankfurt-based travel bank, which is one of the largest Sellers in this country supply the Volks- and Raiffeisenbanks with precious metals, among others.

Almost six percent of the world's gold reserves are owned by Germany

The gold holdings that private households in Germany hold for investment purposes in the form of bars and coins even increased by 35 tons to 5,229 tons compared to the 2021 analysis. The remaining 3,805 (2021: 3,894) tons are gold jewelry. Together with the Bundesbank's 3,353 (as of December 31, 2023) tons, 5.9 (2021: 6.2) percent of the global reserves of the precious metal are in German possession.

If you packed the entire gold holdings of private households in Germany and the Bundesbank into a cube, it would have an edge length of just over 8.6 meters. At the time of the survey, this gold treasure was worth around 750 billion euros (gold price as of January 29, 2024). According to calculations, the gold held by private individuals in the form of coins and bars for investment purposes accounts for 315 billion euros.

According to the analysis, slightly less than two thirds of German citizens (61 percent) own gold in the form of jewelry, bars or coins or indirectly through a special security such as "Xetra-Gold" (Deutsche Börse/Frankfurt) or "Euwax Gold" (Stuttgart Stock Exchange). ). At Deutsche Börse, the gold treasure held for investors has become smaller over the past year. At the end of December 2023, 198.7 tons of the precious metal were stored in the company's vaults in Frankfurt. A year earlier it was 231 tons, and as of June 30, 2022, stocks had reached a record high of 242 tons.

Rising savings interest rates as an alternative

Deutsche Börse viewed the downward trend in its Xetra Gold annual balance sheet at the beginning of January 2024 as a “normal reaction” from investors to the market environment. In December, the gold price had climbed to 2,135 dollars or 1,950 euros per troy ounce (31.1 grams) - and was therefore just below the 2,000 euros per ounce mark, which, according to self-assessment in the travel bank analysis, tempts investors to sell their gold would.

In addition, the interest rate turnaround has “created short-term return opportunities,” explained Michael König, Managing Director of Deutsche Börse Commodities, the issuer of Xetra-Gold, at the beginning of January. Since the European Central Bank (ECB) ended the phase of zero and negative interest rates in the summer of 2022 and subsequently increased the key interest rates in a row, overnight and fixed-term deposits have become attractive again for savers. Gold is considered crisis-proof because the amount of the precious metal is limited and gold never completely loses its value. However, there are no interest or dividends for gold.

Precious metal as protection against inflation

Some bank advisors promote gold in their portfolio as a kind of timeless currency and security, for example in times of high currency devaluation. In the Reisebank survey, those who buy gold for investment purposes actually cited protection against inflation as their primary motive (38 percent). In 2022 and 2023, energy and food prices rose sharply as a result of the Russian attack on Ukraine, driving inflation in Germany to its highest level since reunification at 6.9 percent and 5.9 percent respectively. This causes purchasing power to dwindle and people can afford one euro less.

"Generation Z no longer only knows about high inflation rates from class, but has experienced inflation and its effects themselves. Against this background, some of them have bought gold for the first time in recent years," explained study author Jens Kleine from the Research Center for Financial Services at Steinbeis University. According to the analysis, there were recently significantly more gold buyers in the generation born between 1995 and 2010 than among older respondents.

Inflation has eased in recent months, but wars and crises are supporting demand for gold, as is uncertainty about the outcome of important elections in the USA, for example, and expectations of falling interest rates. Three quarters (75.2 percent) of gold investors stated in the analysis for Reisebank that they wanted to continue to purchase precious metal for investment purposes. However, in the previous studies in 2019 (78.1 percent) and 2021 (76.6 percent), this value was slightly higher.

Anyone who wants to buy gold bars or gold coins currently has to dig deep into their pockets: from the beginning of the year up to and including April, the price of the yellow precious metal climbed to a record high of $2,431 per troy ounce (31.1 grams). Most recently it was still around 2,300 dollars (around 2,140 euros). But this could only be a temporary price correction, as Louise Street of the lobby organization World Gold Council predicted at the end of April: "Looking forward, it is likely that the price of gold will rise much more in 2024 than we saw at the beginning of the year year based on recent developments."