German Investment Demand for Gold Surges

Germans are turning to tangible wealth amid economic and geopolitical turmoil.

Bullion.Directory precious metals analysis 16 May, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Twitter @Lemieux_26

German demand for gold bars and coins climbed 20 percent last quarter to 32.2 tons, according to the World Gold Council (WGC). Alistair Hewitt, head of market intelligence at the WGC, said it was the strongest showing for gold bullion in Europe since 2011 (source).

This conjurers up thoughts of the European credit crunch, which has yet to be resolved, and the first Greece debacle.

As Greece’s new government fails to reach a debt agreement, an alleged leak from the International Monetary Fund (IMF) states that Greece could default on June 5 if deals are not made. If the Grecian fiasco spins further out of control, it is likely that Germany (and France) will bare the brunt of the consequences. These two nations are Greece’s largest creditors, with extended credit reaching 5.4 percent of both nations’ GDP combined.

Germany has also told Greece that it must stay on a strict path of austerity, while Greece’s new government – led by Alexis Tsiparis – said that is no longer an option; and Greece is running out of money. It’s understandable that the Germans want to protect themselves.

The German nation was also a staunch opponent to European Central Bank (ECB) President Mario Draghi’s “whatever it takes” quantitative easing measures. Easy monetary policy coupled with abundant euro printing is a cause for concern. The DAX, or the German equity index, has sharply contracted almost eight percent since topping out in mid-April and is roughly the same level as when Draghi embarked on QE.

Although the DAX is still up over 35 percent since October 2014’s low, the downward pressure on German equities have been sharp and violent.

 Previous Post

Decline In Consumer Sentiment Echos 2007

Next Post  

FX Moves Ahead of the FOMC Minutes; Gold Lingering